Power Tariff Reduction Deal: IPPs Offer Relief in Exchange for Probe Closure
Seven independent power producers (IPPs) have proposed a Power Tariff Reduction Deal to the government, offering to cut electricity rates by up to 50 paisas per unit and waive Rs. 11 billion in overdue payment surcharges. However, this offer is conditional on halting the ongoing investigations into their alleged excessive profits and withdrawing pending court cases. The Power Tariff Reduction Deal could provide significant relief to consumers if approved by the National Electric Power Regulatory Authority (NEPRA).
Tariff Revision Request & Conditions
In a joint petition submitted to NEPRA, IPP representatives argued that cost recovery for fuel and operations & maintenance (O&M) expenses has already been settled. They urged the regulator to terminate any ongoing investigations and regulatory actions.
A representative from one of the IPPs emphasized that their tariff revision request is strictly conditional upon withdrawing all legal proceedings.
“Our proposal depends entirely on the closure of all cases,” the representative stated, highlighting that NEPRA’s notices had already been challenged in the Islamabad High Court.
Similarly, another company’s spokesperson demanded an end to regulatory interventions against their firm.
CPPA’s Support & Potential Consumer Benefits
The Central Power Purchasing Agency (CPPA), endorsing the IPPs’ requests, informed NEPRA that any future savings in fuel and O&M costs would be shared with the government to provide consumer relief.
During a briefing, CPPA’s Managing Director revealed that, as part of ongoing negotiations, all seven IPPs had agreed to waive the overdue payment surcharge of Rs. 11 billion.
Following NEPRA’s approval, both CPPA and the IPPs will withdraw their pending legal cases.
Key Negotiation Points & Expected Tariff Reduction
NEPRA’s hearing also covered exchange rate adjustments, the ‘take-and-pay’ mechanism, and insurance caps, with CPPA confirming that these issues had been settled.
According to CPPA officials, the Power Tariff Reduction Deal is expected to reduce electricity rates by up to 50 paisas per unit.
They further stated that broader negotiations with various IPPs have already resulted in lifetime financial benefits of Rs. 950 billion from power plants.
Agreement with Multiple Power Producers
So far, CPPA officials confirmed, agreements have been signed with 29 IPPs under similar terms. They emphasized that no IPP was coerced into an agreement.
“Any IPP that did not wish to proceed with the agreement was not pressured,” a CPPA official clarified. “For instance, one power company chose not to sign.”
NEPRA will now review the petitions and issue its decision.