QASIM FAZAL - OVER Rs 10 billion have been invested into the N-CPP power projects after the government announced policy called the New Captive Power Policy in 2009. The main feature that attracted investors was the upfront tariff allowed by Nepra, which was formed an integral part of the Policy. As a result, within 2 years of this policy being announced, several projects totalling 150MW were set up and being operated across the country. By 2012, NEPRA decided to illegally hold public hearings to re-determine this already low tariff.
Some points of this policy need to be highlighted. As they all operate on natural gas, there is no guaranteed supply of gas, nor is there a guaranteed payment from the government. However, investors had to use brand new machinery and had to generate between 10-49MW. The devaluation of the rupee is a financial hit that the investor has to take and in the last 2 years it has gone from Rs 85 to Rs.100 to the USD. It should also be mentioned here that this is amongst the cheapest tariffs in the country.
N-CPP projects were set up on a very fast track with investment solely from the private sector. They improved the profitability of distribution companies (Discos) as they purchased electricity at Rs 9 instead of Rs 11 from the grid. This Rs.11 is also called the Energy Transfer Rate (ETR) and the N-CPP tariff is considerably lower, which means that the end consumer does not suffer. The ETR remains low because of plants like these and they should be encouraged on a war footing basis. It is worth mentioning that NEPRA conducted a hearing in 2010 and decided that the N-CPP tariff was in line with NEPRA and that they met all the requirements.
In 2007, NEPRA advertised in the press for power producers to set up power plants up to 50MW and sell it to a power purchaser at a mutually agreed rate provided that it is below the ETR. This is exactly what was adopted and followed in the N-CPP. So why all the fuss?
Furthermore, when NEPRA issued several generation licences they were extremely pro the N-CPP that in their hearings, they stated that the N-CPP projects are a “positive step and is acceptable”. They even went on to state that they “will generate gas based cheaper electricity for a longer period than other projects. Therefore, the project will be extremely beneficial as its tariff will be significantly lower than other upcoming projects”. Also being located close to the national grid will “result in lesser line losses”.
Prior to issuing the generation licences, NEPRA advertised in newspapers, asking all stakeholders and the general public to file any comments or objections, if any, with regards to these projects. NEPRA even wrote to the stakeholders separately asking for comments. As no objections were received and everyone including NEPRA was in favour of these projects, the generation licences were issued. Again, why all the fuss?
It begs the question as to why NEPRA encouraged and was eager for these projects to be set up and now after 3 years they are trying to re-determine a tariff illegally. The consequences of this action will result in 150MW being shut down immediately and fierce litigation to follow. It also seems that NEPRA has taken an anti-Sindh stance because majority of these plants are based in Sindh, generating over a 100MW and they seem adamant in diverting the gas to Punjab.
I thought that we had a power crisis on our hands and that we needed electricity yesterday and not tomorrow. I guess NEPRA is not in touch with reality.