PM forms committee to review power purchase agreements with IPPs

Prime Minister Shehbaz Sharif has established an Inter-Ministerial Committee, led by Minister for Power Sardar Awais Leghari, to review the existing Power Purchase Agreement (PPA) template. 

As per a news report, the decision emerged from a meeting regarding the Neelum-Jhelum Hydropower project, which has been non-operational due to serious design faults, causing significant economic losses.

The committee includes the Power Minister (Convener), Water Resources Minister, Deputy Chairman Planning Commission, Secretary of Power Division, Chairman of NEPRA, Secretary of Water Resources, and Chairman of WAPDA. Their task is to discuss and report on consumer tariff issues. 

During his June visit to China, PM Shehbaz Sharif raised the Neelum Jhelum project’s design flaws with the heads of China Energy/China Gezhouba Group, urging them to rectify the faults promptly.

The Inter-Ministerial Committee formation coincides with discussions about Independent Power Producers (IPPs) heat rates and capacity payments, which are projected at Rs2.8 trillion for 2024-25, largely due to the rupee’s devaluation and interest rate changes.

Current capacity payments to IPPs amount to Rs2 trillion, with consumption still at 13,000 MW against an installed capacity of 43,400 MW.

The committee’s Terms of Reference (ToRs) include: examining the tariff impact of frequent outages at Neelum Jhelum due to structural damages; devising mechanisms to protect consumers from additional charges caused by design flaws; and reviewing the PPA template to protect consumers from power producer inadequacies. 

The committee may include additional members as needed and is expected to report within one week.

Recently, Secretary Power Rashid Langrial assured the National Assembly Standing Committee on Power that the Power Division is ready to terminate IPP agreements if recommended by the National Assembly. 

Minister Leghari also suggested evaluating each IPP individually to determine their contract expiration, payments made, and the potential costs and benefits of retiring them. He ordered an audit of IPP agreements from the past 30 years, to be conducted jointly by the PPIB, CPPA-G, and NEPRA, following a Senate panel’s critical assessment of the contracts.