Hussain Rehan -

Recently there is a wave of misleading articles undermining the existence of Captive Power Plants (CPPs) in the country. There are some facts which need to be corrected,

It is alleged that only CPPs are not achieving 50pc efficiency required for IPPs. Let me ask that how many power plants are running at 50pc efficiency? Barring few IPPs running on gas who are achieving 50pc efficiency all the public sector power plants and KESC (except newly established 560 MW power plant) all are running at less than 50pc efficiency. As a matter of fact even combined cycle power plants at Guddu and Kotri are running at less than 35pc efficiency. The simple cycle power plants at Faisalabad (20pc), KESC Korangi and SITE (34pc), Bin Qasim 26pc) are prime examples of power plants running at less than 50pc efficiency. So why single out captive power plants. By the same connotation these aforementioned power plants should also be penalized for lower efficiencies.

It is also wrongly quoted that CPPs are receiving gas at subsidized rates, this is also not true. All the CPPs are receiving gas at the rate announced by OGRA for a category termed as Captive Power Plants. The rates are increased every time tariff of gas is increased for other categories. Anybody can refer this to OGRA and SSGC/SNGPL web sites for his/her knowledge.

The contracts between DISCOs and CPPs have been entered with mutual consent and the electricity provided by CPPs is the lowest priced electricity provided to the DISCOs. It is even lower than ETR (Energy Transfer Rate) which is determined by NEPRA and charged by CPPA to DISCOs. On top of ETR a distribution margin on Rs. 2.5/kWh is added which make the CPPA provided electricity dearer by more than Rs. 3/kWh as compared to N-CPPs. Further the N-CPP provided electricity is distributed to the local grid (11 kV) thereby reducing line losses significantly. NEPRA in its own deliberations determined this reduction of losses to the tune of 4-5pc which accounts for over Rs. 1.5 billion/year savings for the DISCOs. 

It would be naïve to compare CPPs with IPPs as IPPs have many distinctive advantages, such as 30 year PPA as compared to 14 years for N-CPPs, dollar indexation to their debt services and foreign maintenance whereas no dollar indexation allowed for N-CPPs , Capacity Payments (payment of debt servicing, ROE , Insurance and Fixed O&M) without even dispatching a single kWh whereas N-CPPs are Take-and-Pay which means that they get paid only when they produce and dispatch electricity and above all IPPs are 150 MW and above and N-CPPs are no more than 20 MW. How can you compare the efficiencies of the two different power plants altogether?

All the DISCOs are allowed to receive a quota of electricity from CPPA. If a DISCO is allocated with 500 MW and if there are 50 MW capacity CPPs/N-CPPs in their licensed area, then CPPA reduces the quota by the amount of electricity the relevant DISCO receives from CPPs/N-CPPs. Which means that the differential amount is available in the national pool of electricity and can be distributed elsewhere such as Faisalabad, Lahore and Multan where there is extreme load shedding.

Therefore CPPs/NCPPs are not only providing relief to the local people where they are located but also to the far flung areas benefiting from the little more electricity available in the national pool. 

It is hard to understand that in current times when there are no new IPPs are in the development by both foreign and local investors due to circular debt and default of the GoP for honoring their Guarantee for payment, some vested interest people are making hue and cry over the development of CPPs. it is heartening to know that the local investors and industrialists are shouldering their responsibility to the nation and providing much needed power to the common people of Pakistan. We should encourage them rather than discouraging them. I have a fear that if the persecution continues they might also run away and make their investments somewhere else.