ISLAMABAD: A task force, formed by the prime minister to address capacity payments to Independent Power Producers (IPPs), has proposed transitioning from the current capacity-based payment model to a take-and-pay system. This change aims to relieve electricity consumers from paying for non-operating power plants, sources revealed on Friday.
According to insiders, capacity payments currently make up 70% of the total energy costs paid by consumers. Under the existing agreements, consumers must pay for the full capacity of plants, even when they are not generating electricity. This results in an annual burden of Rs2.1 to 2.8 trillion on consumers for idle IPPs.
The proposed take-and-pay model would eliminate the obligation for consumers to pay for plants that are not operational. The draft also includes other significant cost-reduction measures, such as cutting the return on equity (RoE) to 10%, fixing the PKR-USD indexation at Rs168, and reducing operation and maintenance (O&M) costs by 70%.
However, concerns remain about the removal of the government guarantee under the Implementation Agreement, which would leave receivables unsecured and place the fuel arrangement responsibility on the IPPs. The draft has not yet clarified how the return on equity during construction (ROEDC) will be handled, leaving stakeholders seeking further details.
