IPPs refuse to reduce tariff formula under govt ToRs

ISLAMABAD: In a new development, the IPPs have shown no inclination to initiate talks under the terms of reference (ToRs) handed over to them by the government to reduce the power tariff, saying that some issues in ToRs are not negotiable being part of the government power policies supported by sovereign guarantees.

"However, IPPs installed under 1994 and 2002 power policies are ready to discuss some areas wherein they can provide relief by setting aside ToRs," one of the Chief Executive Officers of IPPs told The News. He said that foreign currency indexation in the base tariff was part of power policies 1994 and 2002. "And when IPPs were installed under power policy 2002, the value of USD was at Rs60 which has now increased to Rs160. The increase in value of US dollar is not the fault of IPPs, rather a result of government’s exchange rate." In the past, he said, nine IPPs gave a lot of concessions to the government by settlement agreements in view of national interest. But the government was unable to obtain formal approval to implement them which resulted in losing the opportunity.

The Settlement Agreement was consented to by such IPPs that had won the Arbitral Award by the London Court of International Arbitration (LCIA) in 2017 for the recovery of unpaid capacity payments, deducted in contravention of legally valid and binding Power Purchase Agreements. "Now we are again poised to hold talks with the government’s technical committee but not under ToRs."

The government wants the IPPs to reduce the electric power tariff not only to provide relief to domestic, commercial and industrial consumers but also help extricate central power purchaser, which is central power purchase agency (CPPA).

And to this effect, the government has handed over the terms of reference (ToRs) to IPPs. According to the copy of ToRs available with The News, the PTI government wants to seek relief mainly by reviewing and analyzing Return on Equity, the impact of Foreign Currency indexation in the base tariff available to local investors, debt re-financing, Operation and Maintenance (O&M) costs, and Delayed Payment Rates (DRRs).

When contacted, Secretary Power Irfan Ali confirmed that the ToRs were handed over to IPPs but there is no indication that they do not want to discuss the ToRs.

The official TOR document says that under the decision of the Cabinet Committee on Energy (CCoE) decision dated April 2, 2020, a six-member committee was constituted under the chairmanship of minister for energy, and comprising special assistant to the prime minister on coordination of marketing and development of mineral resources, secretary Finance Division, secretary Power Division and secretary Law and Justice Division. The panel would deliberate and recommend viable options after negotiations with IPPs to make the power sector sustainable with a long term perspective.