ISLAMABAD: The government has projected a modest reduction of Rs0.50 per unit in electricity tariffs following revised agreements with seven *independent power producers (IPPs). Despite this, total savings over the lifespan of these power plants are estimated at **Rs920 billion, a fraction of the *Rs2.5-2.8 trillion in annual capacity charges paid to IPPs.
During a National Electric Power Regulatory Authority (Nepra) hearing on Monday, officials confirmed that consumers would receive limited relief after agreements were revised with *Nishat Power, Nishat Chunian Power, Saif Power, Sapphire Electric, Engro Power, Narowal Energy, and Liberty Power Tech. While some IPPs, including *Orient Power, opted out, government negotiations continue with reluctant power producers.
Key Revisions and Savings
- *Late Payment Surcharge Waiver: Seven IPPs have collectively waived **Rs11.19 billion, with major contributors including *Nishat Chunian Power (Rs1.84 billion), Saif Power (Rs1.6 billion), and Engro Power (Rs1.7 billion).
- *Operational Cost Adjustments: Revised agreements alter **operation and maintenance costs, applying updated *NEPRA-approved rates for some IPPs, while others will follow a new amendment structure.
- *Furnace Oil Pricing: Set at *Rs165,000 per ton, interveners questioned its relevance given minimal domestic consumption. Government officials assured that any price reductions would be passed on to consumers.
- *Indexation Mechanism: Adjustments include limiting **PKR/USD depreciation pass-through to 70% per annum, while *full appreciation benefits will be transferred to consumers.
- *Cost of Working Capital: RFO inventory levels will be based on **seven-day reserves, while *gas receivables will be adjusted for a 15-day load factor.
Concerns Over Consumer Impact
Interveners raised doubts over whether the International Monetary Fund (IMF) would allow direct tariff relief to consumers. Additionally, lower electricity sales could neutralize the expected Rs0.50 per unit reduction. However, officials assured that savings would be realized gradually and that settlements with IPPs would also include recoveries of excess profits up to 2023.
With 29 IPPs having agreed to tariff revisions, the government aims to further negotiate cost reductions with additional producers to ease the financial burden on power consumers.
Story by Zafar Bhutta
