Five IPPs ‘agree’ to terminate contracts

ISLAMABAD: In an anticipated move, five independent power producers (IPPs) — four set up under 1994 and one under 2002 power policies — have “agreed” to scratch down their Power Purchase Agreements (PPAs).

However, some modalities are being settled, and once these are finalised, all the five IPPs would sign the documents to terminate the contracts, one of the top officials who are part of the Task Force on Power Sector confided to The News.

The IPPs would not be paid future payments, he said, but they would be paid previous dues. However, they would only be paid the cost of electricity and not the interest. “More importantly, the past capacity payments that the government owes to the IPPs amounting to Rs80-100 billion are being discussed. The volume of these dues is being negotiated.”

This correspondent tried but could not obtain the point of view of the five IPPs.

The IPPs which, are set up under BOOT (build, operate, own and, transfer) basis would be handed over to the government and those which are not set up under BOOT mode would stay with their owners, the official said.

“We would save Rs300 billion under the head of capacity payments that are to be paid to them in the next 3-10 years. This is how consumers would get relief of Rs0.60 per unit equal to Rs60 billion in one year”, he said. “After the termination of the contracts, the five IPPs would not be allowed to be functional on a take-and-pay basis.”

He said 17 more IPPs installed under 1994 and 2002 policies have been identified. These IPPs would switch over to the take-and-pay mode from the take-or-pay mechanism. The government, he said, would continue to purchase electricity from them on take-and-pay mode till private power market is established.

“However, once the private power market regime is established, the said 17 IPPs would be allowed to sell electricity under CTBCM (Competitive Trading Bilateral Contract Market) regime”, he said.

“We are on our toes to establish CTBCM within one-and-a half to two years’ time so that IPPs could sell electricity to their clients by using the wheeling charges”, he added.

He said Rs26 per unit as wheeling charges would not work. The charges should be reduced in a way that CTBCM could work properly, putting the country on the way to progress. FBR needs to reduce its revenue collection through electricity bills, he said.

The government is currently mopping Rs800 billion per annum as revenue from electricity bills. It means an electricity consumer pays Rs8 per unit under the head of taxes, duties and surcharges. If taxes, duties and surcharges are reduced by 50 percent, tariff would plunge by Rs4 per unit.

The official said task force is endeavouring to reduce tariff of wind and solar power plants. Some solar plants are charging Rs27 per unit which should be at Rs7 per unit, and wind IPPs are getting Rs40 per unit which needs to be rationalised, he said.