ISLAMABAD   -  The Senate Standing Committee on Power was informed yesterday that 24 IPPs have received capacity payments of Rs1.298 trillion during the last 10 years, as chairman of the committee claimed that against the NEPRA determined 15 to 16 percent return on equity, the private power producers have earned a profit of 60 to 70 percent.

While referring to Mohammad Ali report, Senator Shibli Faraz said that IPPs have earned profits amounting to Rs415 billion, which is up to 87 percent.

The Senate Committee on Power that met under Senator Mohsin Aziz also discussed findings from the Muhammad Ali report, which pointed out over-invoicing by IPPs and lack of heat rate information.

The Federal Minister for Power Division Awais Leghari told the committee that efforts are ongoing to provide a positive outcome. “We want to terminate IPPs that are no longer needed, but we cannot do so unilaterally,” he stated.

Senator Shibli Faraz called for a review of the IPPs agreements made under various governments, demanding to know who were the Minister of Power and Secretary of Power at the time, as well as the information of the law firms involved.

The committee was provided the copies of all agreements signed with Independent Power Producers (IPPs) since 1992. The committee while showing concerns over the agreements called it “faulty and overpriced” and said efforts were made to hide some information related to the IPPs with the committee.

The committee also asked the Power Division to provide a regional comparison, heat audit, and Return on Equity (RoIs) of these projects, which have significantly burdened power consumers.

The panel called for a briefing on the per-unit electricity production costs from these IPPs, as well as a comparison with costs in other regional countries.

Interestingly, the committee was informed that neither data of regional electricity tariff comparison nor expertise are available to make the comparison. Leghari acknowledged the lack of data and expertise to compare the costs with similar regional plants but mentioned that consultants are being engaged to address the issue.

Nepra Chairman Waseem Mukhtar admitted to decreasing electricity demand. Waseem Mukhtar, acknowledged a continuous decrease in electricity demand, revealing that the authority does not intend to add more capacity to the grid. Mukhtar stated, “Our electricity demand is continuously decreasing.”

“There is no need to add more electricity to the system as demand is declining in Pakistan. The electricity demand had decreased by 3% between 2018 and 2024, he added.

“We need to know who mortgaged the country through these IPP agreements,” Faraz stated. He pointed out that facts indicate hydropower was overlooked in favour of IPPs. Faraz noted that ten IPPs were established in Punjab, two in Balochistan, and one in Sindh in 2002 on gas and furnace oil, but hydel projects were ignored.

Leghari responded by noting that the Diamer-Bhasha hydropower project would not be cheap but assured that a task force under his leadership is closely examining the IPPs. “The task force is scrutinizing the IPPs in great detail,” Leghari said.

The Muhammad Ali report mentioned that only a cursory review of the power sector had been conducted. Leghari noted that the report called for a detailed study of IPPs, including a heat audit. However, instead of conducting a heat audit, the matter was taken to arbitration.

The committee was told that by Central Power Purchasing Agency (CPPA) official, that estimated energy charges for the current fiscal year to be around Rs1,260 billion, with capacity payments projected at Rs2,000 billion.

During the past 10 years, 24 IPPs have received capacity payments of Rs1.298 trillion. Over the past decade, 13 furnace oil based IPPs have received a capacity payment of Rs 760 billion while 11 on gas and LNG have received capacity payments over Rs. 538 billion.

Talking to the media after the meeting, Senator Aziz said the issues regarding IPPs are progressing. “Today, all IPP agreements are before us; this has never happened before,” he told reporters. Aziz revealed that some efforts were made to withhold information about IPPs during committee sessions. According to him, NEPRA has allowed IPPs an equity return of 15 to 16 percent. However, the balance sheets of these IPPs show profits ranging from 60 to 70 percent.

The committee had requested a comparison of power plants installed in Pakistan with those in neighbouring countries, but this information was not provided. Aziz noted that a consultant is being hired to prepare this data.

He also called for the implementation of Muhammad Ali’s report on the heat audit of power plants.

Awais Leghari, highlighted ongoing efforts to review and revise Independent Power Producers (IPPs) agreements, including those related to the Diamir Bhasha Dam. He warned that the cost of hydroelectricity from the Diamir Bhasha Dam will be high, stressing, “Diamir Bhasha Dam will increase electricity prices.”

Furthermore, the Committee also commented on the Task Force to Scrutinize IPP, a task force has been established to closely examine IPPs, following recommendations from the Muhammad Ali Report. This report suggests a detailed study, including heat audits, though the focus has shifted towards arbitration rather than direct audits.

Senator Mohsin Aziz raised concerns about the high cost of wind projects in Pakistan compared to international standards, urging a reassessment of why local projects are significantly more expensive.

Minister for Power Awais Leghari expressed displeasure over a Korean power company raising concerns about delays in tariff determination by the National Electric Power Regulatory Authority (NEPRA) for its two hydel power projects in Khyber Pakhtunkhwa.

“Setting tariffs is NEPRA’s job,” Leghari said. “We are answerable to Parliament and the committee, but we cannot provide answers regarding tariffs to private companies. Tariff matters are to be formally heard by the regulator.”

Senator Shibli Faraz criticized Nepra’s independence and questioned its recent tariff adjustments. He inquired whether Nepra had increased electricity costs by three rupees instead of the anticipated five. Faraz demanded transparency regarding the increase in electricity prices over the past two years and urged the provision of detailed reports on power projects nationwide.