- The Prime Minister’s aide said the IPPs had ordered the suspension of the SECP audit.
- Former Hubco CEO advises government to withdraw from single buyer regime.
- The government pays Rs 2 trillion per year to IPPs in capacity payments.
As the incumbent government continues its efforts to review agreements with independent power producers (IPPs) amid concerns over rising electricity tariffs, the Prime Minister’s special assistant on energy, Muhammad Ali, denounced electricity companies for “not allowing regulators to audit their books”.
“No audit of the heating rate of IPPs has ever been carried out in this country,” says Ali, who, along with industry officials and an economist, addressed the controversial issue of agreements with electricity producers during the ‘year. Geo News talk show “Aakhri Mauqa: Pakistan Kay Liye Kar Dalo”.
Participants include Special Assistant to the Prime Minister on Power Muhammad Ali, former SAPM on China-Pakistan Economic Corridor (CPEC) Khalid Mansoor, former Caretaker Minister Gohar Ejaz, former President of the Association of Pakistan Textile Mills (APTMA), Asif Inam, economist. Ammar Habib Khan and CEO of Lucky Electric Power Rohail Muhammad.
The federal government has been under immense pressure to reconsider its power purchase agreements (PPAs) with power stations following an outcry across the country as the addition of capacity payment charges inflated electricity bills beyond what was affordable for the inflation-burdened masses.
In the panel discussion moderated by journalist, analyst and lead presenter Shahzeb Khanzada, the special assistant addressed the public outcry over soaring electricity bills and the ongoing debate around capacity payment charges (CPCs) to IPPs.
During the show, Ali said that in 2012, the Securities and Exchange Commission Of Pakistan (SECP) – as regulator of Pakistan’s corporate sector – wanted to audit IPPs’ accounts of excessive profits, but this The latter resisted and requested a stay order from the court. .
Similarly, he added, the power companies have also not authorized the National Electric Power Regulatory Authority (Nepra) to carry out an “audit of their heating rate”. “If the matter was kosher, then why didn’t they (IPPs) allow this to happen,” he said, refuting the notion that everything about power companies was audited . He added that if IPPs do not allow regulators to carry out the audit, they become “dysfunctional”.
Speaking about excess profits, Ali pointed out that the 2002 regime was a cost plus one regime, according to him, in which the government was responsible for the entire cost of electricity, including salaries, insurance and parts spare.
“Under this regime, they were getting a 15% internal rate of return (IRR) in dollar terms,” he said, noting that if the return is higher than agreed upon, it means “they were earning more.”
“These things need to be streamlined. It needs to be a fair deal for everyone, including the government, consumers and IPPs,” he added.
Meanwhile, Khalid Mansoor – former CEO of Hubco – refuted Ali’s remarks, noting that during his tenure as CPEC chairman, they agreed to conduct audits of the heating rate of power producers.
“In this regard, it was decided to address experts and define terms of reference (…) there was no resistance and we all agreed on this,” he said. he declared.
Mansoor added that the government’s responsibility at the time was to recruit the experts and start the audit process, but “nothing happened.”
He said he had already asked for special assistance to explain why the government is not moving away from the single buyer scheme method. “Opening up the sector, rationalizing transport costs and paving the way for a competitive market,” he added.
He noted that not all IPPs were against the SECP audit, saying if there was a suspension order, the government should have convinced it and canceled it. “Such widespread criticism will affect investments in this sector,” he added.
Capacity payments
Panelists also highlighted the growing burden of capacity payments, which they said are a major contributor to prohibitive electricity prices.
Gohar Ejaz, a prominent businessman who had also served as federal minister for commerce, industry and production during the establishment of the caretaker government last year, criticized the finance minister for announcing that it would recover electricity losses from consumers instead of lifting subsidies.
He said the government pays Rs 2,000 billion annually to power producers in terms of capacity payment.
“They had paid Rs 32 billion each to many non-functional IPPs,” he claimed, adding that the government had managed to save Rs 6,000 billion after the closure of some IPPs.
He added that the country pays Rs 1.2 trillion to the government every year for several non-functional power plants.
Ejaz also claimed that the fee was “not Rs 18, but Rs 29.7” and that government officials were trying to manipulate the actual figures by showing the average cost of capacity payments.
The former minister claimed there were “criminal motives” behind the installation of double-cost power plants.
He added that coal-fired power plants have become a problem because they do not produce even 10% electricity.