Neelum Jhelum outage costs consumers Rs167.8bn, high-level committee reviews impact

A high-level government committee, chaired by the Federal Minister for Power, has revealed that consumers incurred an additional cost of Rs167.787 billion—equivalent to Re0.7551 per unit—due to the unavailability of the 969 MW Neelum Jhelum Hydropower Project from FY 2022-23 to 2024-25. 

The increased cost stemmed from the reliance on more expensive power sources in the project’s absence.

Despite the financial burden on consumers, sources clarified that Neelum Jhelum Hydro Power Company (NJHPC) has not been receiving capacity payments during the plant’s closure. This is attributed to the tariff structure, which is based on a “take and pay” basis. 

Additionally, funds generated through the Neelum Jhelum Surcharge (NJS) have been treated as grants, significantly reducing the plant’s tariff. As capacity payments are excluded, the marginal cost is not attributable to NJHPC.

The issue arose after the collapse of the headrace tunnel of the hydropower plant, prompting Prime Minister Shehbaz Sharif to establish a high-level committee on July 14, 2024. The committee was tasked with assessing the financial impact of the plant’s closure on end-user tariffs, safeguarding consumers against additional charges due to structural flaws, and reviewing power purchase agreement (PPA) templates to prevent future losses.

The committee, chaired by the Federal Minister for Power, included the Federal Minister for Water Resources, the Chairman of Wapda, the Federal Secretary for Water Resources, and the Chairman of Nepra, among others. 

Its inaugural meeting was held on July 19, 2024, and attended by key stakeholders, including officials from the Power Division, the Central Power Purchasing Agency (CPPA-G), and NJHPC.

During the meeting, the Federal Minister for Power outlined key concerns related to the headrace tunnel collapse and its impact on the hydropower plant’s operational and financial components. The committee also reviewed mechanisms to insulate consumers from future financial burdens resulting from design or construction flaws in power projects.