The government will expand the scope of talks with IPPs to reduce tariffs

Islamabad:

As electricity prices continue to rise, the government has decided to expand the scope of negotiations with independent power plants (IPPs) to cover hydel and natural gas-based projects as well, in a bid to reduce tariffs.

Earlier, the Pakistan Tehreek-e-Insaf (PTI) government had started negotiations with the IPPs to revise the dollar indexation clause. A cap has been put in place to control electricity prices rising with further depreciation of the rupee.

The current caretaker government has continued negotiations with wind power producers. Now, it has decided to talk to hydel and gas based IPPs as well.

In a recent meeting of the Cabinet Committee on Energy (CCOE) it directed the Department of Energy to come up with a separate summary.

The cabinet body told the Power Department to file a separate case for engagement with the remaining IPPs, including those dealing with Hydel power that did not sign a memorandum of understanding (MoU).

During the discussions, according to sources, the CCOE members noted that the scope of negotiations should not be limited to wind or bagasse-based power plants, but hydel and gas-fired IPPs can also be included.

They noted that since the summary contained a proposal to extend the scope to the remaining bagasse-based units, a separate summary would be required instead of adding hydel and other IPPs to the existing summary. The CCOE agreed with the proposal.

The energy committee was informed that the Department of Electric Power had submitted a summary entitled “Implementing Key PPA Agreements and Amendments with Wind Power Producers” on May 25, 2023. The CCOE reviewed the summary and asked the Department of Energy to develop a new strategy to continue to works with 14 wind power producers to achieve savings for consumers and reduce costs.

Reading Unaffordable electricity

To comply with the CCOE directive, the Department of Energy has notified a committee to negotiate with wind power producers.

The Power department said Chiniot Power Limited, a bagasse-fired IPP, had not agreed during earlier negotiations to convert the MoU into a binding agreement in the 2020-21 financial year.

However, IPP has now indicated its intention to renegotiate and enter into substantive discussions with the Central Power Purchases-Guarantee Authority (CPPA-G) to resolve its disputes.

Earlier, MoUs were signed with 47 IPPs in the wake of negotiations in 2020. Later, an implementation committee succeeded in turning 46 MoUs into initial agreements for approval by the CCOE.

Out of the 46 IPPs, binding agreements were reached with 32 IPPs and payments were made after the approval of the CCOE and the Economic Coordination Committee (ECC).

The CCOE authorized the Department of Energy to develop a new strategy to continue its engagements with 14 wind power producers. The Department of Energy was of the view that the committee set up to hold talks with the wind power producers could also enter into negotiations with Chiniot Power to assess the company’s proposal and make recommendations before the CCOE.

He indicated that the committee may suggest possible options while maintaining the non-discriminatory proposals for other bagasse-based PPIs.

Published in The Express Tribune, February 8^u2024.

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