Ten Independent Power Producers (IPPs) have formally requested Prime Minister Shehbaz Sharif’s intervention regarding capacity payments, expressing frustration over the government’s approach towards private power generators.
According to a report, in a joint letter, the IPPs highlighted that attributing the high consumer tariffs solely to capacity payments is misleading, as the real issue lies with hefty taxes, transmission and distribution losses, and power theft.
The IPPs— including Pakgen Power, Nishat Power, Nishat Chunian, and Hubco Narowal— argued that despite a reported average generation tariff of Rs 27/kWh, consumer tariffs exceed Rs 60/kWh, due to non-generational costs.
They added that exchange rate depreciation, reduced power demand, and capacity payment pressures have escalated costs, with more than half of capacity payments directed to government-owned IPPs.
These companies voiced concerns over the proposed shift from “Take or Pay” to “Take and Pay” contracts, which they claim could financially destabilize them by forcing them to bear fixed costs without guaranteed purchase commitments from the government.
The IPPs proposed several conditions for terminating their sovereign contracts.
The IPPs request the full payment of outstanding dues at contract termination, either in cash or T-Bills, along with the termination of all “Take or Pay” contracts across GoP-owned, CPEC-related, and privately owned power plants.
They also seek authorization to sell power directly to private buyers through the existing transmission and distribution system and to have SNGPL continue LNG supply to LNG-based IPPs until private import is allowed.
The IPPs argued that this forced renegotiation is the fourth instance of contract interference, which they believe could have long-term detrimental effects on investor confidence.
They emphasized that a meaningful reduction in consumer tariffs can only be achieved through increased power sales, reforms in the transmission and distribution system, and a reduction in excessive taxation.
The letter concluded with an urgent request for the Prime Minister to convene a meeting of all stakeholders to address the concerns and reconsider the policy.
“IPPs are willing to sacrifice, but only if all generators are treated without discrimination,” the letter stated, urging a balanced and well-considered approach.
