ISLAMABAD: The federal government is actively exploring a strategy to reduce “unbearable” electricity tariffs by re-bidding the tariffs for approximately three dozen operational wind power plants. This initiative accompanies efforts to pressure owners of other private sector power projects to lower their rates.
Currently, there are about 12 wind power projects with a tariff of 16 cents per unit, while a similar number enjoy tariffs of 10.5 cents per unit. A third category of 12 wind power plants has tariffs around 4.5 cents per unit.
Background discussions with government negotiators indicate that the re-bidding of tariffs for all wind projects, particularly those with higher rates, is under serious consideration. NEPRA’s Tariff Regulations permit a re-bid of wind power project tariffs every five years, prompting the government to consider re-bidding for existing operational power plants totaling approximately 1,850 MW to achieve tariff reductions. However, insiders at NEPRA claim no such re-bidding exercise is currently underway.
Negotiators estimate that this initiative may result in a maximum reduction of Rs 2 per unit in the base tariff. Various government teams are developing strategies to encourage Independent Power Producers (IPPs) to comply with tariff reductions as requested by the government.
Importantly, nearly all power plant owners have been urged to voluntarily announce tariff reductions to set a precedent for others. Some owners, such as Attock Gen, Liberty Dharki, and Gul Ahmad, have already announced reductions, while others are calculating potential adjustments following discussions with top officials in Islamabad.
The situation concerning 12 IPPs embroiled in litigation at the International Court of Arbitration is also a priority. Government financial analysts have identified overpayments of Rs 50 billion to these IPPs, who, according to Power Minister Sardar Awais Leghari, received preferential treatment from the previous Imran Khan administration.
There is a prevailing view within the government that plant owners engaged in other businesses may be more willing to reduce tariffs, whereas those who have invested solely in power projects are more reluctant. Nevertheless, they may also be compelled to follow suit.
According to the plan, IPPs or Gencos operating at only 20% efficiency will be shut down, with payments made based on net return on equity.
In a policy statement before the Senate Standing Committee on Power, Minister Sardar Awais Leghari stated that the public will receive good news regarding mutually agreed revised deals with IPPs in the coming weeks, as the task force is nearing a conclusion. He clarified, however, that while benefits of Rs 20 per unit are not feasible, the government is exploring ways to achieve reductions of 50 paisa, Rs 1, or 80 paisa per unit.
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