Nepra mulls tariff cut for bagasse power plants, eyes Rs235bn savings

ISLAMABAD: Pakistan’s power regulator Nepra on Wednesday held hearings on requests from nine bagasse-based independent power producers (IPPs) seeking a reduction in their electricity tariffs, a move that could save power consumers an estimated Rs235 billion over the lifetime of the projects.

The proposed revision would cut these IPPs tariffs by Rs3.07 per unit, bringing the rate down from Rs17.13 to Rs14.06 per unit because of cut in fuel cost component (FCC), working capital and return on equity (RoE).

Nepra Chairman Waseem Mukhtar chaired the hearing, which was attended by officials from the Central Power Purchasing Agency (CPPA), IPPs, and other stakeholders. The combined capacity of these nine IPPs is 240MWs.

The CPPA informed Nepra that the fuel cost component for these sugarcane-waste-powered plants has been decoupled from international coal and dollar rates and pegged at Rs4,500 per ton. The IPPs—Chiniot Power, JDW Sugar Mills (Units II & III), Almoiz Industries, RYK Mills, Shah Taj Sugar Mills, Thal Industries, Hamza Sugar Mills, and Chanar Energy — have voluntarily signed amended agreements with the government to reduce their tariff components.

The revised deals also slash the working capital component by 50 percent, while capping Return on Equity and RoEDC at Rs168 to a US dollar. Any future rupee depreciation will see 70 percent of the burden passed to consumers, with IPPs absorbing the remaining 30 percent. Gains from rupee appreciation, however, would go entirely to consumers.

Nepra also concluded hearings on tariff revisions for two other 2002-policy IPPs—Attock Gen and Foundation Power Company.

In a separate session, the regulator reviewed K-Electric’s request to slash February’s fuel charges by Rs6.62 per unit, which could offer Karachi consumers Rs6.6 billion in relief.