ISLAMABAD: Coal power plants in the country are allegedly charging prices for imported coal whilst using low-quality coal in their plants. The plants are supposedly doing this to take advantage of the high prices of coal on the international market. The revelations were made during a hotly followed public hearing of the National Electric Power Regulatory Authority (NEPRA) on coal pricing mechanism.
During the NEPRA’s public hearing, it was informed that the coal power plants are manipulating prices of coal by importing poor quality of coal for power plants. The coal power plants use offspec coal, but they were charging the price of higher quality coal.
These coal-based power plants had committed to use coal containing 6000 calorific values (CVs) but they had been importing coal with 4500 to 5500 CVs. So, they were using offspec coal but they were charging the price of higher quality coal.
Coal price should be scaled down based on quality of coal while coal power plants were demanding the rate for 6000 CVs, it was informed during the public hearing.
It was also informed that these coal power plants had inked agreements with traders whereas these agreements should be signed with coal mines owners. Similarly, these plants were receiving different discounts on CVs, sulphur and moisture and were not ready to give discounts to the power consumers. Furthermore, they were receiving different discounts on CVs, sulfur, and moisture, but were not ready to give discounts to the power consumers.
During the NEPRA hearing, it was further informed that Pakistan had been facing issues of exchange rate and opening Letter of Credits (LCs) for coal import. Officials of the power division informed that a few Chinese banks were ready to open LCs in RMB, and coal-based independent power plants (IPPs) should consider importing coal in RMB.
During the hearing, the issue of importing coal through spot purchases was also raised.
A point was raised in the meeting that according to power purchase agreements signed with imported coal-based power plants, the IPPs can import 10 percent coal through the spot market. Upon this, the regulator suggested an increase in the share from 10 to 20 percent and the coal should be imported through a bidding process to get competitive price of coal from local and international markets.
The coal-based IPPs representatives said that they had long-term contracts with coal suppliers and therefore got the price through negotiation. About the API 4 differential, they said that they had faced a sudden deduction of differentials without prior notice. They said that it was done without an open hearing, and the fuel cost component was applied. They said that 44 ships had been affected due to this.
“Now how can I change the contract through a notification from NEPRA?” a coal-based IPPs representative said in bewilderment. “The entire process will be disrupted if we are directed to go to the spot market,” they said.