Seven Independent Power Producers seek tariff cuts under new agreements

Nepra accepts joint tariff reduction application from Nishat Chunian Power, Nishat Power Limited, Narowal Energy, Liberty Power Tech, Engro Powergen Qadirpur, Saphire Electric Power, and Saif Power 

Seven Independent Power Producers (IPPs), including Nishat Chunian Power Limited, Nishat Power Limited, Narowal Energy Limited, Liberty Power Tech Limited, Engro Powergen Qadirpur Limited, Saphire Electric Power Limited, and Saif Power Limited, have collectively requested a reduction in their tariffs based on the terms negotiated by the government’s Task Force on Energy under the hybrid take-and-pay mechanism, BR reported.

The National Electric Power Regulatory Authority (Nepra) has accepted their joint application for tariff reduction from seven IPPs established under the Power Generation Policy of 2002, aiming to lower tariffs in line with the agreements negotiated between the government and the IPPs.

The government’s Task Force, consisting of various high-level officials including Special Assistant to the Prime Minister (SAPM) on Power Muhammad Ali, National Coordinator Lt General Muhammad Zafar Iqbal, Nepra Chairman, and representatives from CPPA-G, PPIB, and SECP, is engaged with both 1994 and 2002 IPPs.

Key terms of the agreement include a revised tariff structure starting from November 2024. Some of the major changes include the modification of the operational and maintenance (O&M) cost indexation, re-basing the cost of working capital and O&M tariffs, and the introduction of a hybrid take-and-pay mode for the return on equity tariff component. 

Additionally, there are conditions for sharing profits up to FY’23, the waiver of delay payments until October 2024, and changes to the arbitration process to align with local laws.

The government has also claimed that these renegotiated agreements will save approximately Rs1.4 trillion over the remaining lifespan of these power plants. 

While 16 IPPs have signed revised contracts, one IPP, Halmore, refused to sign, accusing the government of mistreatment and criticising the terms of the agreement. 

In response, the government has asked Nepra to conduct a forensic audit of Halmore’s power plant, which is owned by a British national. Nepra has opened the matter for public comment and will hold a public hearing on March 24, 2025, to further discuss the issue.

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