Nepra rejects govt’s reconsideration request on bagasse fuel pricing

Federal government's appeal dismissed on procedural grounds; new mechanism clarified

The National Electric Power Regulatory Authority (Nepra) dismissed a reconsideration request filed by the federal government regarding the modification of the fuel price mechanism for bagasse-based power projects.

As per a news report, Nepra established an upfront tariff for new bagasse-based cogeneration Independent Power Projects (IPPs) on May 29, 2013, which was officially notified on September 3, 2013. In 2014, this tariff was extended to bagasse captive power projects (CPPs) through suo-motu proceedings.

In 2018, Nepra initiated a suo-motu review to amend the bagasse pricing for both CPPs and IPPs under the 2013 upfront tariff. Nepra’s decision was issued on July 16, 2019.

Eight operational bagasse-based IPPs challenged Nepra’s decision in the Islamabad High Court under Article 199 of the constitution. The court suspended Nepra’s decision and referred the case to the Nepra Appellate Tribunal. The tribunal overturned Nepra’s decision on July 16, 2019, and sent the case back to Nepra for a fresh decision, allowing all concerned parties a hearing.

Hearings were held on March 15, 2023, and September 6, 2023, with notices sent to relevant stakeholders, including the Ministry of Energy. However, the ministry did not attend or submit comments. After reviewing all submissions and following legal procedures, Nepra issued its decision on February 7, 2024.

The Ministry of Energy (Power Division) submitted the reconsideration request under Section 31(7) of the NEPRA Act, 1997. The ministry raised concerns about the tariff adjustments for bagasse-based cogeneration IPPs.

Nepra determined that the motion was not maintainable on several grounds. First, the request was time-barred as it was filed beyond the statutory 30-day period allowed for such reconsiderations. The Ministry of Energy submitted the request on March 20, 2024, while Nepra issued its determination on February 7, 2024.

Additionally, Nepra highlighted that its jurisdiction to reconsider tariff determinations was limited to public-sector licensees involved in distribution and supply, not generation companies. Expanding the scope beyond the statutory provisions was not permissible.

Despite the procedural dismissal, Nepra addressed the merits of the ministry’s claims. It clarified that the new fuel price mechanism for bagasse projects, which delinks bagasse pricing from international coal prices, was based on comprehensive consultations and aimed at reducing the impact of exchange rate fluctuations. This mechanism was designed to provide a lower cost for indigenous bagasse fuel compared to imported coal.

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