KAPCO shows the muscles: gets provisional tariff in one day

ISLAMABAD: National Electric Power Regulatory Authority (NEPRA) has granted provisional tariff to Kot Addu Power Company on Take or Pay basis, a day after the public hearing in which Member (Technical) and CPPA-G had raised different issues.
For Block-1, total tariff is Rs 30.3010 per unit on gas/ LNG and for Block –II Rs 32.9806 per unit. On LSFO, total tariff for Block -1, will be Rs 31.8915 per unit for and Block –II Rs 34.4770 per unit.
According to the determination released on Wednesday, NEPRA said that as requested in the Addendum, KAPCO shall be entitled to received 25% ROE on Take or Pay basis while the remaining ROE shall be linked with actual dispatch exceeding 25%.
The fuel cost components have been worked out on the basis of LSFO Price of Rs. 150,817.50/Ton including transportation charges and Gas/RLNG price of Rs. 3,442.78/MMBTU. The fuel cost components shall be subject to adjustment for variation in fuel price.
The despatch shall be on economic merit order. The revised provisional tariff shall supersede the approved provisional tariff of August 4, 2023. The provisional tariff shall take effect from the date of issuance of this decision.
Shahab Qader Khan, CEO KAPCO, who also played his role in revised deal with Task Force on power sector, had requested for provisional tariff with the promise to sort out disputed issues in due course of time.
Member (Technical) NEPRA, in his additional stated that it is a well-established fact that the installed generation capacity in the CPPAG system, as of June 2024, totalling around 42,512 MW, including around 25000 MW of thermal generation, exceeds the current demand. The utilization of thermal generation capacity in the past two financial years, FY 2023 and FY 2024, remained at around 32% and 29%, respectively. Furthermore, a significant portion of this surplus capacity available in pool is more cost-effective than the proposed interim tariff by KAPCO. Additionally, it is important to note that this is not the first time the case for extending the operation of KAPCO power plant has been presented to the Authority. Previously, the Authority approved an extension of485 days for this plant. It is important to note that, when renewing the Generation License for KAPCO on September 8, 2022, for a period of three years, the Authority explicitly directed the NTDC and MEPCO to resolve the identified technical issues within this timeframe. These issues were causing KAPCO1 to operate in violation of the Economic Merit Order (EMO). Unfortunately, despite the clear direction from the Authority, and with only six months remaining in the three-year period, the situation has not improved as required. It is relevant to highlight that, on one hand, all stakeholders are working diligently to eliminate costly “Take or Pay” generation capacity. On the other hand, the extension for operation of KAPCO’s more expensive generation capacity is being proposed on a “Take or Pay” basis, citing transmission and grid constraints. Moreover, it is worth mentioning that the 4,000 MW HVDC line, built to transfer cheaper generation from the south to the north, is operating at a low utilization rate (around 38 % during FY 2024) despite the full capacity payment charges being paid for. The failure to address these issues has resulted in a situation where the country is unable to optimally utilize its more economical and indigenous energy resources in the South, primarily due to the limitations of the transmission system. Consequently, we find ourselves reinvesting in outdated and inefficient generation capacity, further exacerbating the problem. These facts highlight significant flaws in both the planning and execution of power generation and transmission system projects. It is unfair to shift the burden of these inefficiencies onto electricity consumers, particularly when these issues stem from inadequate planning and execution by the power transmission company.
“In light of the responsibilities outlined for power transmission company, including NTDC and DISCOs in NEPRA Act and Applicable Documents, I am of the considered opinion that the interim tariff should be granted to this company strictly on a “Take and Pay” basis. However, whenever this plant operates in violation of the Economic Merit Order (EMO), the differential cost between the available cheaper generation and the cost of generation from the plant operated in violation of EMO should not be passed on to electricity consumers. Instead, this cost should be borne by the entities responsible for providing a constraints-free transmission system. Ends