CPEC power projects to recover security cost from consumers

KARACHI: Multibillion dollars worth of power projects to be set up under the China-Pakistan Economic Corridor (CPEC) will be allowed to recover the entire cost incurred throughout their life spans to avert security challenges from electricity consumers, The News learnt on Thursday.

Nepra, in a notice, said the energy projects would be permitted to recover cost of security required for upcoming power projects from consumers through monthly bills for 25-30 years life of the projects.

“Authority has decided to allow 1.0 percent capital cost of the project reduced by $150,000/annum as security cost in respect of each CPEC power project in accordance with the approved payment mechanism and the same shall be treated as pass-through item,” Nepra added.

Earlier, the Economic Coordination Committee of the Cabinet approved a summary of the ministry of water and power that proposed a policy directive to Nepra to allow one percent of the capital cost net of $150,000 amount on account of security expenditures of CPEC power projects to be distributed annually starting from the construction period till the term of the power purchase agreement.

Almost half of the $56 billion CPEC projects are related to energy sector. Sources said there are 19 energy projects under the CPEC framework.

They said Nepra estimated security cost of the projects at five million dollars per annum.  The estimated costs of the projects are more than $25 billion and they have production capacity of more than 11,000 megawatts.

The energy projects are based on thermal as well as renewable power sources. The government is already charging at least four special surcharges of around Rs3.50/unit in consumer tariff to make up for low recoveries, high losses, special debt servicing and tariff equalisation across various distribution companies.

Under the CPEC agreement, Pakistan would take the necessary measures to ensure the safety of Chinese personnel and projects. Keeping in view the internal and external security threats, government has decided to establish a special security force/division of armed forces to ensure security of CPEC projects. The division comprises of at least 15,000 military personnel.

The power projects’ operators will pay the predetermined security cost for each year of the construction period in lump sum with arrears, if any, to the relevant ministry/agency designated for the purpose. The security spending will be included in the capital cost of the project at the time of commercial operation date adjustment and will be part of the tariff.

“In future, if the overall security situation improves and GOP (government of Pakistan) considers that special security arrangements are no longer needed and the special security force/division is released from this responsibility, no payment shall be made by the power purchaser on account of special security arrangement,” Nepra said in the notice.