ISLAMABAD: The renegotiation of agreements with Independent Power Producers (IPPs) has resulted in lifetime savings of Rs1.3 trillion, with the government actively working to pass these benefits on to electricity consumers, the Power Division announced on Tuesday.
Electricity consumers have been paying Rs2.5 to 2.8 trillion annually in capacity charges to IPPs, some of which received payments without generating electricity due to flawed past agreements. To address this issue, the government renegotiated contracts to lower capacity payments, leading to a Rs7 per unit reduction in electricity tariffs. Efforts are underway to ensure these savings reach end users.
In a recent cabinet meeting, Power Minister Sardar Awais Ahmad Khan Leghari reviewed ongoing and planned reforms aimed at enhancing power sector efficiency. Key measures include a nationwide tariff reduction of Rs4.96 over the past eight months, renegotiated tariffs with 14 IPPs and eight bagasse-based IPPs, securing total savings of Rs1,333 billion, and demand stimulation policies.
The minister outlined future reforms, such as converting imported coal-based power plants to Thar coal, developing an Integrated System Plan, rationalizing net metering, and reducing circular debt. He also highlighted progress in solarizing tubewells in Balochistan, where 4,000 out of 27,000 tubewells have been converted, saving Rs100 million in power sector losses.
To improve governance and efficiency in Distribution Companies (DISCOs), the government has streamlined policies to enhance transmission and distribution systems. Under the revised IPP agreements, 14 producers have agreed to new terms, including returning Rs31 billion in excess profits and waiving late payment interest (LPI) claims.
Additionally, the government has facilitated settlements with key stakeholders. Buyers of UPL and UPL-II waived Rs62.5 billion in LPI claims, contingent on OGDCL waiving Rs46 billion in claims against them. Similarly, five IPPs on the SNGPL network waived Rs4.6 billion in LPI receivables, provided SNGPL forgoes Rs1.9 billion in claims against them.
As reforms continue, the government remains focused on stabilizing electricity prices and reducing financial burdens on consumers.
Story by Zafar Bhutta
