Power consumers to pay Rs650b capacity charges

ISLAMABAD: The issue of increasing payments of capacity charges will worsen more as the power consumers will have to pay the mammoth amount of Rs650 billion in next financial year 2018-19 as capacity charges, divulges the latest official working also available with The News.

In 2015-16, the end consumers paid the capacity charges, which are fixed cost and included in the tariff, amounting to Rs280 billion and in 2016-17, the consumers paid Rs358 billion in the head of capacity charges which have been projected in 2018-19 at Rs650 billion. About the current fiscal year, the official said that the data is being prepared that is to be finalised by end of the current fiscal.

In next financial year, the Net Hydle Profit, estimated to be soaring up to Rs200 billion to be paid to Punjab and KP, will also be the part of Rs650 billion meaning by that the payment of capacity charges will also continue to haunt the power sector.

On account of the new electricity generation to be added by the incumbent regime will go up to 11,000MW by June 2018, the surplus capacity will be hovering at 4,000MW in winter season and the power consumers will pay their capacity charges.

However, Zargham Eshaq Khan, Joint Secretary (power finance) said that in the last year Rs203 billion has been paid in the form of capacity charges to the power houses excluding the payments of net hydel profit.

Mr Khan said that the government will continue to pay till five years after 2028 as the Power Purchase Agreements (PPAs) with most of the IPPs have been signed for 25-30 years and they will end up by 2028 and capacity charges payments will continue 5 years beyond 2028. He, however, admitted that every year the capacity charges payments to IPPs hovers in the range of Rs150-200 billion.

Secretary Power Division Yousaf Naseem Khokhar while admitting the capacity charges payments a threat to sustainable power sector said that in the past questionable Power Purchase Agreements (PPAs) were done with IPPs which were not in favour of the countrymen. However, the then decision makers are of the view that Pakistan was considered high risk country and no one was ready to invest in power sector. So such kinds of PPAs were inked to ensure the electricity availability in the country. “If one happens to go through such PPAs, one will feel that investors had drafted the PPAs on their own and the state officials had just signed the said agreements. Now many of PPAs of some IPPs are going to expire in 4-5 year and will completely erode by 2027-28.”

“Now after power projects under umbrella of CPEC, there is a line of projects from other economies we have,” he claimed saying that Pakistan now enjoys the luxury to pick up the projects with PPA for 10-15 years at the maximum with no capacity charges in the agreement. In the future, the projects will be entertained with no capacity charges in the agreements.