ISLAMABAD : K-Electric (KE) has urged the federal government to honour its commitments including additional 2000 MW electricity from the National Grid to Karachi consumers.
Newzshewz has learnt that in a letter to top bosses concerned government entities , Syed Moonis Abdullah Alvi has cited reference to Power Division letter vide Reference No. 2(4)/2024- 2(4)/2024-General, and the meetings of the National Task Force on Implementation of Structural Reforms (Power Sector), held on November 07 and November 18, 2024.
KE appreciated the consideration given to key issues faced by KE, and for carrying out extensive deliberations on these matters. Further, as apprised during these discussions, KE has reiterated that under the existing Power Purchase Agency Agreement (“PPAA”) with Central Power Purchasing Agency (CPPA-G), and Interconnection Agreement (“ICA”) with National Transmission and Despatch Company (NTDC), KE is currently supplied 1,000 MW from National Grid on firm basis, while supply over and above the firm 1,000 MW and up to the Transmission Interconnection capacity is on a pro-rata basis at par with other DISCOs. The term of these Agreements is 10 years from their effective date i.e., January 01, 2024.
According to the KE, the execution of these Agreements was made possible subsequent to prolonged engagement with CPPA-G and NTDC, which was based on policy
level decisions that were made by the Government of Pakistan (GoP) and communicated to KE/approved during the Cabinet Committee on Energy (“CCoE”) meeting held in June and August 2020. These directives included the abandonment of 700MW local coal base-load power plant against purchase of additional power of 1,400 MW from the National Grid, over and above the already apportioned supply of 650MW (cumulative supply of 2,050 MW from National Grid to KE), at that time.
However, during subsequent engagements with GoP, KE was informed that instead of 2,050 MW, the firm capacity under the Agreements will be restricted to 1,000MW while supply over and above the firm capacity will only be made on pro-rata basis at par with other DISCOs.
” This shift in the policy decision significantly impacted KE’s long-term generation planning, and also challenged the viability of its infrastructure investments, already committed to facilitating the receival of additional power from National Grid,” KE said adding that considering the aforementioned, it sincerely believes that decision taken by the Task Force to increase the supply of firm capacity to KE from National Grid from the existing 1,000 MW to 2,000 MW, needs to be swiftly implemented, along with the execution of necessary amendments in the Agreements in order to provide the required clarity to KE for its long- term generation plan.
In addition, the following is the point wise response of the action items listed under point no. 1 of the National Task Force Letter No. 302/A/ National Task Force-119, dated November 20, 2024, appended with Power Division correspondence: (a) firm Guarantee on availability of additional 1,000 MWs (Total 2,000 MWs) from NTDC till
30 June 2032. Review of same for extension beyond 2032 will be undertaken in June 2028. As stated during the meeting held on November 18, 2024, a firm guarantee on availability of additional 1,000MW (total 2,000MW) from NTDC till the expiry of the term of Agreements, will be substantially advantageous and hence, it was agreed by KE to incorporate the amendment in the executed PPAA and ICA and the extension of the term of the Agreements beyond 2033 by June 2028. Accordingly, a draft amendment of ICA and PPAA has also been prepared and shared with the Power Division for consideration and execution ;(b) analysis report highlighting benefits to Government through availability of 2,000 MWs of electricity by NTDC to KE (especially ceasing addition of new power plants and consequent additional capacity payments). KE’s analysis report has also been shared.
” We firmly believe that this will assist in addressing the issue of low utilization of available generation capacities; thus, providing a major relief to the GoP and consumers. We have based our analysis on the available information from relevant National Electric Power Regulatory Authority (NEPRA) determinations; however, in case of any adjustments, we remain available to collaborate with CPPA-G/NTDC, to firm up the results, ” said Moonis Alvi.
KE has further stated that its written commitment will not process the case for addition of capacity till government withdraw the additionally committed 1,000 MWs, adding that subject to agreement on firm availability of additional 1,000 MW (2,000 MW in total), KE remains committed to not add any generation plant, except for renewables and replacement of plants, which have completed their life, or generation sources which will assist KE in reducing its generation and power purchase costs via fuel displacement. In addition, in case of increased demand where KE is required to add generation to meet its capacity obligation, the same will be done after soliciting requisite regulatory approvals.
” We would appreciate that in such a scenario, support from the requisite forums should be extended to KE, to ensure uninterrupted power supply to the consumers of Karachi,” Alvi maintained.
Moreover, an important aspect for GoP’s is that in order to add any new generation, typically, a minimum time period of five years is required; therefore, as agreed, any alteration in the committed supply of 2,000 MW from National Grid, should be agreed and communicated to KE latest by June 2028. Timely issuance of revised directives
with regards to the availability of the firm supply beyond 2033, by the concerned authorities, is necessary to carry out the required development works for any new capacity, before it can be made available for the generation of power.
Mr. Alvi is of the view that while KE affirms that it will exercise extreme diligence in carrying out the compliance of the current decisions in order to assist the GoP in overcoming the prevailing challenge of capacity payments in the country, it would be equally important to ensure a continued and reliable supply of power to KE as per the agreed firm capacity of 2,000 MW because under the fuel supply agreements (for e.g. Gas Supply Agreement with PLL), a minimum ‘Take or Pay’ obligation will need to be committed, which otherwise could result in fuel shortages and consequent incremental load-shed in case of shortage / curtailment of supply from the National Grid to KE.
” It is our understanding that the firm committed supply of 2,000MW for KE, would imply that CPPA-G/NTDC will be obligated to meet KE’s power demand, at all the times up to the stated capacity. Further, this committed supply will not be curtailed, due to any shortfall of power that may be experienced by the national pool as the power supplied from the National Grid is expected to become a lynchpin for KE in meeting its service delivery obligations, as well as maintaining its financial sustainability and any reduction from the committed firm 2,000 MW may inadvertently result in incremental load-shed in KE service area. Thereby, not only increasing the difficulties faced by the consumers of Karachi, but also impacting KE’s cash flows and increasing losses,” he maintained. KE has also shared draft amendments in agreement with NEPRA and CPPA-G .
KE has also plan for replacement of inefficient plants with renewable/ cost effective plants and consequent impact on tariff, which provides a comprehensive picture of the entire scenario.
Further, as discussed during the meeting held on November 18, 2024, KE is pursuing its Renewable Energy projects of 640 MW and has completed the competitive bidding process for these projects after obtaining the required regulatory approvals. KE has submitted the Bid Evaluation Report (BER) of these 640MW RE projects with NEPRA, however, NEPRA’s decision on the same is still awaited. These projects together would result in the per annum energy saving of Rs 12.841 billion and forex saving of annual $ 87.04 million, with the displacement of imported fuels to the extent of these projects would displace. Swift approval by NEPRA will also assist in prompt realization of these savings along with much needed restoration of investors’ confidence in the ongoing reforms currently being undertaken within the Pakistan economy and the power sector in particular.
Moreover, apart from RE addition, the impact on tariff remains strongly hinged on the following key factors: (i) the e supply of 2,000 MW firm power from NTDC to KE, and the number of years, for which it will remain available ;(ii) conversion of 660 MW Jamshoro Coal Power Project and 1,320 MW Port Qasim project from imported coal to Thar coal, for the direct offtake by KE. The power utility company believes that these actions may reduce KE’s generation tariff to 7.02 cents/kWh in the year 2033.
Ends
