ISLAMABAD: Amid much focus on developing power projects on imported liquefied natural gas (LNG) for quick results, the government is delaying a notification on upfront tariff for small hydropower projects.

The tariff was announced by the National Electric Power Regulatory Authority (Nepra) on Oct 14, 2015, after more than three years of talks with the provincial authorities and local and international financial institutions at 12.78 cents per unit (around Rs13 per unit) for 30 years.

Informed sources told Dawn that the sponsors of a number of small hydropower projects, mostly in Khyber Pakhtunkhwa and Azad Kashmir, had been engaged with respective governments for development of small projects of up to 25MW generation capacity, being a provincial subject under various energy policies of the government.

The determinations were issued on the request of sponsors of Riali Hydropower Company and Kathai Hydropower but was then joined during public hearings by the governments of AJK and KP for projects, like Blue Star Energy, Ranolia, Machai, Jabori, Karora etc. Most of these projects ranged between 10MW and 25MW.

A Nepra official said the government was bound under section 31(4) of the Nepra Act 1997 to notify tariff determined by the regulator within 15 days or submit a request for reconsideration within 15 days. The Nepra was also bound after receipt of the review petition to decide the matter in another 15 days.

He said the five-member Nepra had unanimously approved the upfront tariff on Oct 13 and conveyed it to the ministry of water and power the very next day ie Oct 14, 2015, but the ministry sat on the notification which should have been issued within 15 days after a determination is made by the Nepra.

The government neither notified the upfront tariff nor filed any review petition within the stipulated time. Nepra spokesperson Ayesha Tassduq declined to comment.

“We are considering to file a review petition because we feel the determination needs to be revised in the interest of the consumers,” said Water and Power Secretary Mohammad Younas Dagha, hinting the upfront tariff for such projects was on the higher side.

“Tariff should be in such a way which gives premium for higher efficiency and better machinery and site,” he said.

He said the government would also file a request to the regulator to condone the requirement for review after the 15-day deadline.

Another official said the Nepra had given 28 different tariffs for small hydropower projects in a single determination for various plant factors, low and high flow heads, machineries and project sites instead of designing the tariff regime in a manner that may compel investors to go for quality, efficiency and economy. This was despite the fact that all risks were being shifted to the government.

Unless notified by the ministry of water and power in the Gazette of Pakistan, the financial institutions despite having signed term sheets for extending loans to the developers were not ready to formally sign off loan agreements.

A project sponsor said that initially there was no clear policy for small hydropower projects and given the importance of domestic fuel with no escalation, the Nepra intervened and heard all the stakeholders and then developed rules for transmission lines and evacuation of the electricity.

It took about four years as earlier the National Transmission and Dispatch Company (NTDC) and the Central Power Purchase Agency were reluctant to negotiate small plants on less then 132KV transmission lines. The Nepra, instead of the water and power ministry, resolved this issue.

This was despite the fact that various power policies announced by the respective governments and approved by the Council of Common Interest (CCI) acknowledged that the provincial governments would be free to set up themselves or through the private sector projects of less than 50MW.

It was in this background that the upfront tariffs for solar and LNG-based projects were immediately approved and moved for gazette notification even though LNG or coal-based tariffs were based on foreign fuels.

The upfront tariff based on 50 per cent plant factor involved a maximum of Rs12.06Kwh which would gradually come down in case of higher plant factor.

The Nepra determined that maximum tariff for projects based on foreign loans would have 13.4 cents per unit tariff for first 10 years and then 6.7 cents per unit for next 20 years with a 30-year average of 10.88 cents per unit.

The upfront tariff for locally funded projects was set at Rs16 per unit for first 10 years and then Rs7 per unit for next 20 years with 30-year levelised tariff of 12.78 cents per unit.

The proven potential of small hydropower projects that could be developed in less than three years was estimated at 1800MW but was much higher involving longer development period.

Published in Dawn, February 2nd, 2016