Seven major IPPs seek Nepra’s nod to cut tariffs

ISLAMABAD: In a bid to ease pressure on electricity consumers amid the IMF-backed structural reforms, seven major independent power producers (IPPs) have sought Nepra’s approval for reduction in their key tariff components.

The National Electric Power Regulatory Authority (Nepra) has accepted joint applications filed by the Central Power Purchasing Agency (CPPA-G) and IPPs operating under the 2002 Power Policy.

The applicants include Nishat Chunian Power Ltd, Nishat Power Ltd., Narowal Energy Ltd., Liberty Power Tech Ltd., Engro Powergen Qadirpur Ltd., Sapphire Electric Power Ltd., and Saif Power Ltd. The regulator has scheduled a public hearing on the proposals for March 24.

The tariff adjustment applications propose revisions including reduction in the Operations and Maintenance (O&M) costs, adjustments in the cost of working capital, and a change in the insurance cap.

Following extensive talks with the government’s energy task force, the IPPs have agreed to amended contracts adopting a “hybrid take-and-pay” payment structure and lowering the cost of power generation. They have mutually agreed with the power purchaser to enter into amended agreements.

Under this model, CPPA-G will pay 35 percent of the revised Return on Equity (RoE) and Return on Equity During Construction (RoEDC) components. If the net electricity output exceeds 35 percent of the total contract capacity, the IPPs will receive additional payments.

The revised cost of working capital is based on seven days of inventory, 15 days of receivables, and an RFO price of Rs165,000 per ton (excluding GST), and will follow KIBOR plus 1 percent.

Additionally, the insurance component will be capped at 0.90 percent of the allowed EPC cost starting fiscal year 2025-26. The proposed exchange rate of Rs278.80 per US dollar will also be used in cost calculations.

Local O&M costs will be indexed quarterly at the lower of five percent per year or the actual national consumer price index (NCPI), while foreign O&M costs will be adjusted for 70 percent of rupee depreciation, with full benefit of any rupee appreciation passed on to consumers.