Ministry objects to Nepra’s high rates for some solar projects

ISLAMABAD: Given the trend of decline in setting up costs of solar energy power plants internationally, federal ministry of water and power has refused to notify the higher solar tariffs determined by National Electric Power Regulatory Authority (Nepra) and has requested the authority to reconsider and review its determination in the best of national interest to effectively safeguard the interests of power consumers. The approved higher tariffs would cost power consumers Rs79.5 million per annum and Rs795 million in next ten years.
Official record available with The News shows that higher tariff is approved in case of few companies which will benefit them in tens of millions per annum. Ministry of water and power through its letter to registrar Nepra on November 13, 2015 has requested the authority to reconsider these approvals of higher rates and rationalize them as per its own approvals of lower rates after recent public hearings.
Nepra being the sole authority/regulator in the power sector determines and notifies tariff for generation, transmission and distribution of energy.
The basis for all tariffs is the generation tariff, which the regulator determines based on prevalent prudent practices while considering its effect on the end consumers. Share of renewable energy projects have now at considerable level in national grid and resultantly have stronger impact on the basket prices which ultimately is to be borne by the end consumers. “Government of Pakistan under its energy policy of July 30, 2013 has combined the tasks to optimise and bring down the generation cost to reasonable level,” a senior ministry official told The News adding “Numerous initiatives including the short to midterm plans of coal and LNG-based power generation projects and long term plans of indigenous hydel power development are among the key elements to not only add generation to national grid and bridge the supply/demand gap but also bring the generation cost at reasonable level.”
The cost of setting up of renewable energy-based power plants is internationally on a declining path and according to officials the government is eager that these global declines in project cost are reflected in the generation cost of the renewable projects in Pakistan. Nepra has been determining tariff of solar-based power plants on grid applications from project capacity of 5 MW to 100 MW. The tariff determined by the regulator for these power projects range from about Rs17.9 per unit which was determined and notified during early 2014 to the reduced tariff of Rs14.85 per unit through revised determination issued in January, 2015.
It is important to mention here that the higher tariff of Rs15.78 is tariff of generation only and after including debt servicing it will be Rs25.78 per unit which will ultimately impact the overall per unit price as now share of solar energy in overall power mix is increasing and has reached a substantial level.
The Ministry of Water and Power Office Memorandum sent to Registrar Nepra under No. IPPs-(Misc)/15 dated November 13, 2015 reads;
“Subject: Request for the reconsideration of the authority determination on account of tariff for solar power projects, I have been directed to state that we are in receipt of authority determination on account of tariffs for various solar power projects and this ministry would like to bring to the authority’s notice that the determination for aforementioned renewable energy projects is the one of the highest after two lower tariffs (one determined on 22-01-2015 and the other even lower for which the public hearing was held recently).
2. In these circumstances when the authority has concluded the public hearing for revision of tariffs on a lower side, the determination at an earlier higher tariff of January 2014 may not be in the interest of the power consumers.
3. It is therefore, requested that the abovementioned tariff sent to this ministry may kindly be reconsidered and revised to utilize the lowering of tariffs for all these projects.
4. This issues with the approval of the competent authority.