ISLAMABAD - The Khyber Pakhtunkhwa government on Thursday sought 390 percent increase in Net Hydel Profit (NHP) from current Rs1.10 per unit to Rs5.38 per unit.
In a public hearing held at Nepra, under the chairmanship of Nepra Vice Chairman Saifullah Chatha on bulk supply tariff petition of Wapda hydroelectric, Khyber Pakhtunkhwa Chief Minister Pervaiz Khattak sought 390 percent increase in NHP from current Rs1.10 per unit to Rs5.38 per unit which will help to yield Rs70-80 billion additional revenue for the province.
Khattak along with his cabinet members and coalition partners was attending Nepra’s hearing on a petition filed by the Wapda that sought an increase of Rs3.61 or 98 percent increase in tariff, for fiscal 2017-18, to finance additional burden for payment of Rs1.10 per unit NHP to the Punjab to match KP’s existing NHP.
During the hearing, Wapad’s case was represented by Finance member Anwarul Haq, whereas KP government Legal Advisor Shumail Butt represented the provincial government. The chief minister said that the president, CCI and Supreme Court had already given their verdict regarding the NHP of KP, so there is no need to discuss the issue further. “Now it is the time for Nepra to implement this verdict of these top institutions,” he added.
In 2015, the centre and KP government had came up at an “interim settlement” under which NHP was increased from Rs6 billion to Rs18.8 billion a year and which was been worked out at Rs1.10 a unit of bulk electricity supply, but that time too, the provincial government remained ‘sensitive’ regarding any attempt by the centre to make changes to the AGN Kazi formula, which it considers a principal document. Earlier, NHP remained capped at 34 paisa per unit or Rs6 billion per annum for 25 years.
The Khyber Pakhtunkhwa chief minister, while speaking in the public hearing, accused the federal government of tampering with the minutes of the Council of Common Interests (CCI) and stated that he took up this issue in the previous meeting. “Every time federal government changes the minutes of the CCI which is why I have to go through the minutes before the next meeting,” he added. He said that the decision of CCI has already been given on NHP and Presidential Order is in place, adding that now Nepra should announce its decision in accordance with constitution and law. The Rs1.10 per unit NHP was temporary arrangement, he maintained.
Khattak also criticised low capacity of transmission and distribution system, saying that if transmission system is not improved then how would the government sell electricity in months to come? He said KP is not being given its share of 14 percent. “We are just being given 10 percent which is unfair to the province. If one part is unable to use it then give to that part of the province where the system is better,” he added.
The chief minister said that he had offered to the federal government and Wapda that he would personally ensure 100 percent police security and clearance of electricity theft but the Wapda was a corrupt organisation and their staff was directly involved in theft. He said in fact the centre was being run by a corrupt government that was not interested in empowering, improving and strengthening institutions through transparency.
He said that his government was in the process of completing 700-1000 small hydropower projects with total generation of about 100MW that would be provided to consumers at Rs2 per unit. He said that the incumbent government is not interested in improving the system, adding that he was ready to go to extremes but the Wapda is not cooperating with him.
In reply to another question, he said that Discos are involved in corruption and theft but he is ready to extend all possible policy support to eliminate electricity theft. “I am ready to use my entire assembly members to help eliminate electricity theft but after that it would be the responsibility of Disco to sustain it,” he argued. Khattak threatened the federal government that “If the province was not provided its full due share of electricity to province, then we will knock the doors of the court of law.”
He further said that the provincial government is fully in support of the centre in eradication of electricity theft in the province, provided the centre is serious in this drive. The Wapda and the federal government are encouraging the theft and takes commission from thieves, he claimed.
He said, “If the centre gives power generation and distribution rights to the provincial government then within 24 hours we will be ready to take control of Pesco, then there will be no loadshedding in the province and the cost of power will also down to half.” Khattak said that if Nepra accepts the request of KP government, the province will get Rs91 billion in accordance with the NHP formula of 1991.
The Nepra acting chairman informed the chief minister that Nepra team, headed by Hamayat Ali Khan, will visit the province to familiarise himself with the electricity issues of the province. He said smooth supply of electricity is the constitutional right of the province.
Earlier speaking in hearing, Anwar said the Wapda’s bulk tariff should be increased from Rs3.69 per unit to Rs7.30 per unit. He said the Rs1.10 per unit was being paid to KP following a 2015 agreement between KP and federal governments with backdated implemented from 7th National finance Commission award instead of previously capped NHP rate of 30 paisa per unit under the AGN Kazi formula. On the same analogy, Punjab was also now being paid the same amount since last year. Therefore, increase in tariff of Rs3.61 per unit was required.
The representative of KP government Shumail Butt said that KP’s NHP case has been cleared from Nepra to CCI and president, saying that there is no hitch in implementation of Kazi Formula. He maintained that freezing of NHP is against the spirit of Kazi Formula. He further stated that according to the constitution, the amount of NHP is the right of the concerned province but unfortunately Wapda is giving only Rs1.10 per unit to KP whereas the remaining amount is being spent on expensive power projects in Punjab.
Appearing for the consumers, Barrister Asghar Khan argued before the Nepra authority that Wapda cannot operate under one bulk generation licence as under the Nepra Act, each generation facility has to be separately licensed and it is mandatory for Wapda to provide duly audited accounts or regulatory accounts for public and regulatory scrutiny. He further stated that the consumers of electricity cannot be burdened retrospectively with the arrears of the net hydel profit as this is contrary to the law, constitutional provisions and fundamental rights of the consumers.
Barrister Asghar Khan submitted at length that net hydel profits have to be calculated in accordance with the express and mandatory provisions of the Article 161 (2) of the constitution which provides for methodology for determination of net hydel profits which cannot be converted into rate asset base by Wapda or the regulator and charged again to the consumers; that power has been mandated to CCI in accordance with prescribed parameters.
He advocated the cause of the consumers by stating that once the tariff is paid by the consumers, they should not be burdened again with net hydel profit amount which is not a pass through otherwise it will result in unjust enrichment of the public sector entities at the cost of the consumers. He also maintained that any financial transfers taking place between the federal government and the province government on account of net hydel profit should not be and cannot be passed on to the consumers as net hydel profit is an absolute amount and not based on kWh basis. He also pointed out that the institutions in the power sector are subject to control, directions and supervision of the CCI under Article 154 of the constitution and being part of Part II of Federal Legislative List.
He lamented the practice of obtaining loans for payment of net hydel profit as being non-prudent utility practice and hence should not be allowed as part of tariff as it would be tantamount to rewarding inefficiency, mismanagement and wilful loses of public sector entities.
Nepra allowed the revised amount of NHP Rs18.704 billion to the KP province against previously allowed Rs6 billion as an interim arrangement besides directing Wapda to bring the matter of NHP payable to provinces before the Council of Common Interests (CCI). A total amount of Rs70 billion has been agreed upon on account of arrears of uncapped NHP after reconciliation of mutual claims in the power sector between the two governments as full and final settlement.
Wapda, after seeking concurrence of CCI through the Ministry of Water & Power, filed a tariff petition for recovery of the arrears in four instalments. According to CCI decision, Wapda would also pay Rs82.71 billion to Punjab as arrears of NHP. To settle Rs38.12 billion, Wapda issued irrevocable promissory note of one year duration to Punjab government last year. The issuance of the promissory note was not contingent upon tariff. The balance Rs.44.59 billion will be paid in three equal instalments after tariff determination by CCl/Nepra as follows: (i) Rs14.86 billion in FY 2017-18; (ii) Rs14.86 billion in FY 2018-19 and (iii) Rs14.86 billion in FY 2019-20.
Wapda’s CFO, in the petition said that projected weighted average cost of Capital (WACC) for FY 2015-16 worked out to 16.26 percent for hydel power stations and 14.10 percent for hydel power projects as against 14.60 percent determined for FY 2015-16 for both HPP and HPS. Other income has been projected as Rs300 million for FY 2017-18 against Rs1.001 billion determined by Nepra for FY 2015-16. Regulatory revenue gap of Rs32.049 billion has accrued (Rs14.830 billion for FY 2015-16, Rs17.219 billion for FY 2016-17).
He said cost plus hydel levies margin for FY 2017-18 are as follows: (i) Irsa charges 0.005 per unit; (ii) Water Usage Charges (WUC) Rs0.425 per unit; (iii) NHP Regular (KP) Rs1.10 per unit on generation of power plants located in KP and (iv) NHP Regular (Punjab) Rs1.10 per unit on generation of plants located in Punjab.
Net generation of 33,598 GWh for FY 2017-18 has been estimated keeping in view the following factors: (i) average of last five-year generation; (ii) forecasted hydrology situation in the related year; (iii) additional generation from commissioning of Tarbela 4th Extenion and Golen Gol projects for the proportionate period at estimated utilisation factors of the generating units after commissioning.
Capital cost and levelised tariff of hydropower projects (IPP mode) will be as follows; (i) Tarbela 4th Extension Rs5.2613 per unit; (ii) Golen Gol, Rs13.4737 per unit; (iii) Keyal Khwar Rs16.1769 per unit; (iv) Dasu HPP Rs8.4334 per unit; and (v) Diamer Bhasha hydropower project Rs10.5479 per unit.