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May 5, 2021

ECC may approve arrangement for additional power from NTDC to KE

National

May 5, 2021

ISLAMABAD: The Economic Coordination Committee (ECC) that is to meet today (Wednesday) with Finance Minister Shuakat Tarin will consider the summary of Power Division seeking approval for arrangement of additional power from NTDC (National Transmission Dispatch Company) to K-Electric.

According to the copy of the summary, the Cabinet Committee on Energy (CCoE) approved additional supply of 1,300 MW from national grid to K-Electric on 19th June, 2020. The CCoE on 27th August 2020 further reviewed different aspects of additional supply of 1,300 MW to K-Electric and took decisions that include KE, CPPA and NTDC will initial the tripartite Power Purchase Agreement for additional power supply of 350-450 MW within one-week time period, while keeping the financial settlement clauses in square brackets with CPPA's proposed-language and Finance Division and Power Division will expedite action for finalization of ‘clauses related to financial settlement and submission of the same to the ECC.

Multiple meetings were held between KE and CPPA (Central Power Purchase Agency) to finalise the tripartite PPA for additional supply to KE. The disagreement on various clauses of the proposed PPA, however, could not be resolved.

K-Electric wishes that the additional capacity to be provided under the agreement may be increased from 1,300 MW to 1,400 MW. Power Division supports the proposal of KE CCOE in its decision dated 27th August 2020 directed that “KE and NTDC should start taking necessary actions for transmission arrangements for supply of additional 350-450 MW immediately to ensure availability of power supply to Karachi in time for meeting its power demand during peak summer season starting from March 2021."

And pursuant to this decision, KE is drawing an additional 350 MW from national grid in addition to 650 MW to meet the emergent demand during the month of Ramazan.

The summary says that K-Electric has agreed in principle to be treated on the same principles as applied to the 10 ex-WAPDA DISCOs. The primary rationale for this is that no other provision exists under the existing NEPRA rules and regulations for withdrawal of electricity from the National Grid. There are still a few areas of disagreement, which the Power Division feels will have an adverse impact upon circular debt. The issues also include: KE desires the payments to CPPA be adjusted against the subsidy of the Government of Pakistan. Such adjustment is not supported by the Power Division. K-Electric agrees to provide SBLC as a guarantee against payment. Power Division, to the contrary, is insisting on SBLC backed by an ESCROW arrangement.

The Power Division requested the ECC to deliberate on the outstanding areas of disagreement and approve the proposals that include non-adjustment of subsidies against transfer price, enhancement of the capacity to 1,400 MW on firm and pro-rata basis, SBLC backed with escrow arrangement for replenishment of SBLC upon encashment or grant of access by KE to its Master Collection Account on pari passu basis with its lenders, MDI recorded on non-coincidental basis till the entire system is established on co-incidental basis, K-Electric to be treated at par with the other ex-WAPDA DISCOs and it shall share shortfall in power, if any, with the rest of the country under N-1 contingency and draw of additional 350-450 MW by KE from NTDC may be allowed till May 30, 2021 and formal PPAA is signed on terms and conditions. The ECC is also requested to consider and approve the execution of PPAA (Power Purchase agreement) for the existing supply of 650 MW on the same terms and conditions.