12 November 2004	Friday	28 Ramazan 1425

ISLAMABAD, Nov 11: The National Electric Power Regulatory Authority (Nepra) has refused to bypass procedures and legal requirements to give preference to an investor for setting up a 200MW plant in Karachi for additional power generation on an emergency basis, Dawn has learnt.

The authority has asked the government to recoup over 400MW of the Karachi Electricity Supply Company's capacity or hand over to the KESC two gas turbines of 300MW gifted recently by the United Arab Emirates to Pakistan, whose installation and start of operation would take a short time.

"Any attempt to bypass procedures or legal requirement in the interest of expediency or driven by a preference to a particular investor may lead to an outcome similar to that of the independent power producers under the 1994 power policy," said a letter written by Nepra Chairman Saeeduz Zafar to the cabinet division.

The Nepra chief said the IPP contracts lacked transparent procedures through which other stakeholders, particularly consumers, could express their opinion in the matter and exorbitant purchase prices were guaranteed therein, which escalated power rates steeply.

The cabinet division, on a request of the water and power ministry, had asked Nepra to cut short its tariff determination process or give an approval in principle so that a 200MW barge mounted project sponsored by a United States-based firm could be established in nine to 10 months under the directives of President Gen Pervez Musharraf.

"As per the Nepra Act, there is no provision for the grant or an in-principle approval or otherwise of a power project proposal," said the Nepra chairman.

Nepra sources said the authority was at a loss as to why the government had rejected six offers of various investors to set up fast-track projects in Karachi through competitive bidding to get a reasonable tariff and was pursuing exclusive granting of the project to an investor bypassing the rules and regulations.

The authority has, however, assured the government that, once specific information on the project was made available, the tariff determination would be carried out as expeditiously as possible under the law and rules for timely completion of "genuine capacity enhancement" required by the KESC.

The rules of the Nepra Act lay down the process of tariff determination, under which an opportunity has to be given to all the interested parties to express their opinion on a tariff petition.

Nepra has said that if the situation in the KESC was compelling, the gas turbine equipment gifted by the UAE should be handed over to it for installation and enhancement of its generating capacity by about 300MW, which would be a cost-effective and time-saving option.

Another cost-effective and time-saving option is to regain the KESC's lost capacity of old units through engineering techniques, since the installed capacity of the company is 1,800MW, which has reduced to 1,400MW. The large gap between the installed capacity and the current capacity of the KESC provided the possibility of recouping a substantial part of that, the sources said.

Nepra has pointed out that the KESC provides generation and distribution services and its integrated status preconditions that it would contract for generation capacity if it is not able to enhance its own capacity or it finds alternative sources of power less costly.

Any request for enhancement of generation should, therefore, be initiated by the KESC, clearly demonstrating its constraints of capacity and projection of load growth, sources said.

That required that the power capacity envisaged to be installed and timing of induction of power generated at various units should be in conformity with the company's expansion plans, they said.

The preliminary requirement, therefore, was a no-objection from the KESC regarding confirmation of additional capacity requirement, the location at which the facility was required, the impact on the financial viability of the company and a willingness to purchase power from external sources, the sources said.

The KESC was also on the priority list of entities earmarked for privatization, they said.

Nepra has specially allowed a multi-year formula-based tariff as per the desire of the federal government and the Privatization Commission as the intending investor may not like to burden the company with incremental costs of comparably expensive power generation.

It was suggested that the Privatization Commission should be consulted before any additional burden was imposed upon the KESC.

The KESC faces a shortfall of about 600MW in the current year, which is expected to rise to about 1,300MW by 2009-10.

To meet the shortfall, the government is supporting the development of a 200MW barge-mounted gas-based project near Bin Qasim in nine months without any bidding, although original sponsor of the project, GSB Technologies, has been replaced by another firm, e-Planet Ventures, even before the launching of the project. Last month, it rejected six similar projects citing shortage of gas.