National Electric Power Regulatory Authority (Nepra) has approved Transmission Service Charge (TSC) of Rs 0.1584/kWh (O&M component including National Transmission and Despatch Company Ltd – NTDC – local component and insurance component of HVDC Matiari – Lahore Transmission Line) from March 18, 2021 till June 05, 2021 for 800 MW and from June 06, 2021 till September 01, 2021 for 2200 MW maximum demonstrated capacity as certified by independent engineer.
The authority has announced its decision on a tariff review petition of Pak Matiari-Lahore Transmission Line Company (PMLTC). It has also turned down claims of the petitioner including extension in Required Commercial Operations Date (RCOD) citing different rules.
The project established under CPEC ±660 kV HVDC Matiari-Lahore Transmission Line achieved its commercial operation date successfully on 1 September 2021 as per agreed timeline between NTDC and Pak Matiari-Lahore Transmission Line Company (PMLTC).
The company in the instant tariff modification petition has submitted that the company and NTDC have agreed to extend the RCOD as defined in Article 1 of the Transmission Service Agreement (TSA) on May 14, 2018 from 27 months to 33 months in accordance with terms and conditions agreed in Memorandum of Understanding (MoU) of February 18, 2021.
PMLTC sought following modifications in its tariff determination: (i) to amend RCOD from March 1, 2021 to September 1, 2021 and allow the same as pre COD period; (ii) to allow the TSC on maximum demonstrated capability for pre-COD period (based on low and high power test); (iii) to allow the revenue loss of approximately Rs 14 billion during pre-COD period (i.e. from March 1, 2021 to September 1, 2021) as an exceptional cost item within the project cost at the time of COD adjustment; (iv) to approve the payment and testing mechanism as stated in transmission service addendum agreement and Implementation Addendum Agreement; and (v) to allow provisional indexation of reference tariff components (Rs 1.37/kWh) till the time the final one-time adjustment of amended modified tariff determination.
The authority conducted hearing on June 17, 2021, wherein the viewpoint of all the concerned parties was presented.
It considered the submissions of the petitioner and documents submitted by the company and NTDC in support of its claim, The authority observed that defects in transmission line was acknowledged by both the parties i.e. NTDC and PMLTC in papers of November 30, 2020. Even then, certificate of readiness was issued by PMLTC’s Engineer M/s CESI, on December 01, 2020. Subsequently, low power test was performed on December 02, 2020, which resulted in frequency oscillation in line. Accordingly, notice of dispute was issued by NTDC to PMLTC on December 11, 2020 wherein NTDC have highlighted certain contractual requirements which later on were resolved through MOU between both the parties on February 18, 2021. The Authority also noticed that NTDCL was unable to provide total capacity of 4400 MW for the testing of the transmission line on high power.
PPIB stated during the hearing that due to pandemic, performance and contractual obligations were not fulfilled in time. Accordingly legal battle began between the companies i.e. NTDC and PMLTC. In this scenario PPIB, MOE, BoD of NTDC and PMLTC have agreed to defer / delay the actual COD for six months to make it workable for everyone. In this scenario MOU was signed with mutual consent of both parties on February 18, 2021.
The authority observed that in its original decision, both parties PMLTC and NTDC were directed to ensure timely completion of their transmission line through fulfillment of their contractual responsibilities. However lack of fulfillment of the contractual obligations under TSA were acknowledged by both parties through MOU dated February 18, 2021.
It also examined the extension provisions of RCOD under TSA pursuant to Section 6.1, Section 6.5, Section 6.6(c), Section 7.7, Section 8.1(b), or Section 8.3(a) (ii) of ISA or by reason of a Force Majeure Event. However, no such event has been occurred.
Under the Policy Framework for Private Sector Transmission Line Projects, 2015, security package comprising of TSA and IA was prepared by the GOP for the private investors. Therefore, the amendments in security packages i.e. TSA , IA etc was required to be approved by the ECC.
Accordingly once the MoU was signed by both parties, the amendments in TSA and IA was approved by the ECC through its decision dated March 31, 2021 which is the requirement under the Policy Framework and is independent of regulatory function. Ministry of Energy (MoE) in its letter dated August 02, 2021 also highlighted that Nepra as a regulator may conduct its full due diligence as to quantum and basis of payment so as to strike a balance between interests of NTDC consumers and PMLTC.
The regulator stated that in order to protect the end consumer from inefficiency, cost overrun due to delay in completion of the project during given time line, as a matter of principle, it has never allowed the extension in RCOD with allied costs to any licencee except in cases of Force Majeure Events (FME) declared by the contracting parties i.e. Power Producer and Power Purchaser and approved by the GoP.
The regulator contended that in the light of evidence, the claim of PMLTC for extension in RCOD is not justified, therefore, is not allowed to the company. However, PMLTC and NTDC are required to fulfill their respective contractual obligation for performing the low power test, high power tests, trial run test etc within the time agreed between the parties before September 01, 2021. PMLTC and NTDC indicated that, for the under question period there is no Nepra approved TSC for utilization of the transmission line. Accordingly any TSC to be allowed for this period has not been discussed under the relevant issue.
The petitioner requested to approve the payment and testing mechanisms stated Addendum Agreement and IA Addendum Agreement. However, the Authority while considering the request of PMLTC noticed that testing procedures, schedules, demonstration protocols and payment mechanism are obligated to be agreed between Parties (NTDC, PMLTC & IE) therefore Nepra has nothing to do in this perspective.
The petitioner has submitted that that there has been a significant change in the indexation parameters specifically the devaluation of Rupee /USD 104.40 to Rupee/USD 160.80, changes of local CPI from 207.30 to 269.27 and US CPI from 241.38 to 260.47 etc since issuance of tariff determination. PMLTC submitted that the consequence of the changes in indexation parameters is substantial and detrimental to the obligations of the company towards its lenders, contractors and shareholders and requested that till the time the final one-time adjustment of tariff determination at actual COD is processed and approved by the Authority, interim indexations on provisional basis are provided at the applicable PKR/USD,US CPI, Local CPI and LIBOR rates prevailing for the relevant quarters as opposed to the rates provided in the tariff determination.
MoE, in its letter of August 02, 2021 stated that there is no mention of pre-COD tariff indexation either in amended TSA or the ECC summary / decision. Therefore, Nepra may consider the case of indexation for the tariff payments during pre-COD period on merit as per Nepra tariff determination, regulations and procedure.
The authority considered the request of PMLTC and observed that the stance of PMLTC has not been supported by NTDC, PPIB and MOE. In view thereof the stance of indexation before COD is not legitimate in the instant case.
As per decision of the authority, the reference tariff of PMLTC shall become applicable after COD. Accordingly once the COD is achieved and PMLTC submits its request for true-up/adjustment of the relevant tariff components to Nepra, the indexation on this account can be considered by the authority at that point in time.
In accordance with the provision of Section 7 read with Section 31(7) of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997, the Authority has approved Transmission Service Charge (TSC) of Rs 0.1584/kW/hr (O&M component including NTDC local component and insurance component) for the period from March 18, 2021 till June 05, 2021 for 800 MW and for the period from June 06, 2021 till September 01, 2021 for 2200MW maximum demonstrated capacity as certified by independent engineer.
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