Govt projects Rs 3.5 trillion in savings from revised contracts with 29 IPPs, GPPs

The Power Division revealed that the savings from the revised or terminated contracts of 29 Independent Power Producers (IPPs) and Government Power Plants (GPPs) are projected to reach Rs 3.498 trillion over their remaining tenures, ranging from 3 to 20 years, according to a news report.  

The disclosure was made during a meeting of the Standing Committee, chaired by Senator Mohsin Aziz, where the committee discussed ongoing efforts to reform the power sector and reduce its financial burden.

Despite these efforts, the committee was informed that the Federal Cabinet has yet to approve the reduction in buyback rates for new net metering consumers, which would cut rates from Rs 27 to Rs 10 per unit. The Prime Minister has directed the Power Division to review the policy with relevant stakeholders and present a revised proposal.

The committee was also briefed on the progress regarding the termination of contracts with IPPs. As part of a broader restructuring effort, six IPPs have had their contracts terminated, while revised tariff agreements have been signed with nine Baggasse Power Plants and 14 IPPs under the Power Policy 1994 and 2002. 

These measures are expected to result in substantial savings, with the early termination of five IPPs alone saving Rs 411 billion. Revised tariffs for the remaining plants are expected to save Rs 238 billion from the Baggasse Power Projects and Rs 922 billion from the IPPs of 1994 and 2002.

In addition to these developments, negotiations with state-owned power plants, including GENCOS and RLNG plants, have been completed and approved by the Cabinet. 

These agreements will yield Rs 354 billion in savings from GENCOs and Rs 2.3 trillion from other plants, including Haveli Bahadur Shah, Balloki, and PTPL.

However, these savings will not directly benefit consumers until the National Electric Power Regulatory Authority (Nepra) approves the necessary tariff modifications. Once these changes are approved, the Prime Minister will announce a reduction in electricity tariffs.

As per media reports, tensions arose during the meeting between Power Minister Sardar Awais Leghari and Opposition Leader Senator Shibli Faraz, who exchanged sharp remarks over the government’s handling of the power sector. Leghari defended the government’s policies, citing the International Monetary Fund’s (IMF) approval of the Extended Fund Facility (EFF) as evidence of the success of the current approach. 

Faraz, however, criticised the government’s approach, particularly its mid-term policy changes, which he argued would deter new investments in the sector. He also called for accountability regarding expensive power plants and the names of officials responsible for them. 

In response, the power minister acknowledged pressure from affected companies during the renegotiations but maintained that the government’s policies were ultimately in the country’s best interest.

Regarding the net metering policy, the power minister assured the committee that there would be no changes for existing consumers, but new net metering consumers would be subject to the revised terms.