ISLAMABAD: In a bid to alleviate the burden of high-power tariffs on consumers, the Power Division is seeking approval from the Cabinet Committee on Energy (CCoE) to empower a five-member committee for negotiations with bagasse-based Independent Power Producers (IPPs).
The move is part of the caretaker federal government’s concerted efforts to address escalating electricity prices.
A meeting of the Cabinet Committee on Energy is scheduled for January 26, 2024, with a four-point agenda that includes water issues of Muzaffarabad city due to Neelum-Jhelum Hydropower Project, continuing negotiations with Independent Power Producers (IPPs), circular debt report and report on the progress towards implementation of competitive trading bilateral contracts market (CTBCM).
Sources informed that the Minister for Power Division has authorized the submission of a summary before the CCoE, emphasizing the caretaker government’s commitment to making crucial decisions aimed at reducing electricity prices and providing relief to consumers grappling with exorbitant power tariffs.
Previously, the CCoE had considered a summary from the power division titled “Implementation of Master Agreements and PPA amendments with Wind Power Producers (WPPs) dated 25th May, 2023.” In response, the CCoE directed the power division to devise a new strategy for continued engagement with 14 wind power producers, with the objective of achieving savings for consumers and cost reduction.
In line with this directive, the power division established a five-member committee, led by the Managing Director of the Private Power and Infrastructure Board (PPIB), to engage with 14 wind power producers. Now, the power division is seeking an extension of the committee’s scope to include negotiations with bagasse-based IPPs, said sources.
According to sources, the said five-member committee will enter into discussions with both wind power plants and power plants associated with sugar mills. It is expected to urge the 14 Wind Power Producers and bagasse-based IPPs to voluntarily reduce their tariffs. And, in case otherwise, legal action may be taken if an agreement is not reached, and payments to these entities will only resume after the signing of new contracts. The government has already halted payments of Rs20 billion to 14 wind power plants, citing rates higher than the market, said the sources.
It is pertinent to mention that the power division had previously signed Memoranda of Understanding (MoUs) with 47 IPPs in 2020, converting 46 of them into initialed agreements. However, negotiations hit a roadblock with 14 Wind Power Producers, as lenders held divergent views on the initialed agreements, preventing further progress. The current proposal seeks to extend the negotiation scope, addressing both wind and bagasse-based power producers, as the government aims to foster a more competitive and consumer-friendly energy market.
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