K-Energy rejects tariff for coal power generation

KARACHI: Planned K-Electric’s coal-combusted electricity generation project is at risk as the power utility has rejected a tariff set by the regulatory authority, saying it “may render the project unviable."

The National Electric Power Regulatory Authority (Nepra) determined a levelized 30-year tariff of Rs3.5723/kilowatt hour for the coal conversion of K-Electric’s furnace oil-based power plants at Port Qasim.

“After a thorough review of the determined tariff, we can safely conclude that the determination renders the project unviable if attempted to be implemented without further adjustment,” a document said.

K-Energy was issued a licence for the coal conversion of K-electric’s existing oil-fired plants of 420 megawatts (210x2).

K-Energy is not satisfied with the tariff and demanded adjustment in the capital cost, efficiency and auxiliary consumption levels taken as benchmark by the authority while determining the tariff.

K-Energy said the project is a coal conversion plus replacement, overhauling, rehabilitation project. “Capital cost for such a coal conversion project needs to be greater than a simple coal conversion project,” it said. “Additional cost of $120 million will be required for replacement, overhauling and rehabilitation in addition to the 0.57 million/megawatt allowed for simple coal conversion.”

The authority has already disallowed K-energy’s request for an internal rate of return (IRR) of 21 percent as against the normal 17 percent allowed to other coal independent power producers (IPPs). 

“All other coal lPPs, which supply electricity to NTDC (National Transmission and Despatch Company), are covered by an implementation agreement – a sovereign government of Pakistan guarantee protecting their investment,” it said. 

“K-Energy does not have any such guarantee or protection available. A higher IRR was requested in order to compensate for the lack of the same. However, the company agreed to the authority’s decision in this regard.”

The K-Energy’s document said the loss to consumers of Karachi, “from continuing to operate these units on oil has been extremely severe.” 

“Already hundreds of millions of dollars more in electricity cost, based on difference between oil and coal tariffs, have been paid by the consumers of K-Electric while waiting for the coal conversion project to come to fruition,” it said.

The company said discontinuation of this project, “if happens, will add further misery to the lives of ordinary Karachi consumers who were expecting some relief in the shape of cheaper, coal-based electricity.”

“We are confident that the authority would like to protect consumers of K-Electric from the curse of load shedding and high priced electricity,” it added, requesting adjustment in the tariff determination.