ISLAMABAD, March 21: In partial revival of 1994’s power policy, the National Electric Power Regulatory Authority (Nepra) has approved an upfront tariff for new thermal independent power producers (IPPs), ranging between 5.9 and 13.8 cents per unit to develop up to 1400-mw electricity on emergent basis.
The new tariff is a combination of many parameters and varies for different technologies of power plants and different fuel-mix but lowest tariff for gas based projects comes to 5.9 cents per unit while maximum tariff for diesel based projects comes to about 13.8 cents per unit.
Nepra has determined the new upfront tariff on the guidelines of the federal government that wanted to meet looming power shortfall in 2007 in the wake of economic growth in specific areas where shortages are very clear. Its formal announcement would be made within the next few days.
Nepra sources said the new tariff was a slight departure from the 2002 power policy and revival of the 1994 policy but it was bound under the government’s policy directive to give upfront tariff.
The 1994 power policy remained under criticism for over a decade mainly because of an upfront tariff that led to installation of thermal power projects in access to the required capacity and higher consumer tariffs.
The 1994 policy was based on 7-8 per cent economic growth rate which could not be sustained in the subsequent years. The upfront tariff now is based again on 7-8 per cent GDP growth.
Water and Power Secretary Ashfaq Mehmood, who was also holding the same slot in 1994, when contacted said the government has now adopted a three-pronged policy.
First, to offer upfront tariff for fast track development of IPPs to meet immediate shortfalls and keep on reviewing them every six months on the basis of variables. Second, to negotiate tariff where investors could wait or where projects have some peculiarities. Third, to hold international competitive bidding where detailed specifications would be available. In all the cases, the objective was to offer market-based tariff to investors.
The new tariff would be applicable for “combined cycle plants to be established in areas of Lahore, Faisalabad, Gujranwala and Multan areas”, said a copy of the tariff provided to Dawn by water and power ministry sources.
In addition, the new tariff would also be applicable to IPPs in Hyderabad Electric Supply area in respect of approved proposals for procurement by National Transmission and Dispatch Company.
In all the cases, the projects should base their operations on the primary fuel as gas and the backup fuel as high speed diesel (HSD) and residual fuel oil (RFO) and annual composite operation with nine months on gas and three months on backup fuel of two categories of projects i.e. up to 200-mw and above 200-mw.
Incentive has been given to those investors who install higher capacity plants (above 300-mw) in the shape of retaining the benefit of economy of scale. The new tariff would also be allowed to simple cycle operation of gas turbines for the new IPP plants in Hyderabad, Lahore, Faisalabad and Gujranwala Electric Supply Companies.
Moreover, the same tariff has also been given to reciprocating engine technology plants up to 200-mw capacity based on gas and RFO operation in respect of approved proposals for procurement by Karachi Electric Supply Company and NTDC.
To facilitate early commissioning of new IPP projects, the projects that achieve commercial operation date before June 30, 2008 have been allowed an incentive equivalent to Rs131 per kilowatt per month in addition to the normal capacity payment during the period commencing from COD till June 30, 2008.
The impact of transmission cost and losses have not been accounted for in the tariff calculations and would have to be determined separately. The tariff would cover almost all IPPs in pipeline as well those expected up to December 2006. The tariff would be valid up to December 31, 2006 in case the prospective IPPs accept it in writing before that date and apply for formal approval of tariff and grant of generation licence.
Alternatively, if the upfront tariff was not acceptable to an investor, tariff petition could be filed with Nepra that would take about two months to reach tariff determination without any reference to the upfront tariff.
