ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) has admitted for second review under political pressure a request by a government-owned generation company to enhance the cost of Nandipur Power Project by 55 per cent to Rs65 billion.

The power regulator has taken the decision to allow second review in relaxation of rules and is expected to jack up Nandipur’s 30-year power tariff by Rs4 per unit.

In April last year, Nepra had approved the 30-year tariff at Rs11.63 per unit with project cost at Rs42 billion.

As the controversy progressed over the 425MW Nandipur project, cost overruns, delays and mismanagement, the Generation Company-V (Genco-V) – a subsidiary of the Ministry of Water and Power – sought a review of the Nepra decision with a request to increase its estimated cost to Rs65bn.

Nepra heard the review petition and decided on Jan 29 this year in which it rejected most of the cost escalations demanded by the Genco-V.

A senior Nepra official said that the government was now against seeking Rs23bn increase in the project cost with an impact of Rs4 per unit increase in the 30-year tariff of the project. He said it was a rare case in which the regulator was allowing a second review of its own decision that too in relaxation of regulations.

He said that any party feeling aggrieved by the regulator’s decision could file a review motion within 15 days of the issuance of the Nepra determination. The government and its generation company have already missed this opportunity to file a second review petition within the stipulated deadline.

However, the ministries of water and power and finance have pressured the Nepra chairman and other members to condone this requirement and find a way out given the fact that expenditure had already been made on the project cost escalation.

A finance ministry official said the fact of the matter was that an expenditure had been made because of the cost escalation which had to be recovered from somewhere and regularised. He said no government functionary could be expected to fund the cost difference from his own pocket.

In its second review petition, the Genco-V said the project cost had increased due to increase in the engineering procurement and construction cost and for laying a pipeline to supply Liquefied Natural Gas to the plant site. The pipeline alone costs an additional Rs8bn.

It demanded that because of the higher cost, a revised generation tariff of Rs15.63 per unit be allowed for 30 years of the project life.

The Nepra had previously held that the pipeline cost should be borne by the gas company which would earn return on LNG supply and it should be at the expense of the power plant.

While disposing of the first review petition in January this year, the Nepra had approved the cost of engineering, procurement and construction at $109 million instead of $382 million demanded by the government. It had asked the government to adjust the higher cost in equity for the project.

The Nandipur controversy had erupted last year when the plant was shut down due to a technical fault and tussle between the chief of the power company and the Ministry of Water and Power. This led to a series of audits, probes and parliamentary debates, but nobody was held accountable.

Nepra had put on record in one of its determinations that during the tenure of the previous federal government, the law and justice ministry was responsible for delaying the project for about four years during which period the project cost increased by about 160pc — from $329m to $847m. In the process, the ministry caused a loss of over Rs113bn to the nation until three years ago.

“The Ministry of Law, Justice and Parliamentary Affairs is responsible for causing a delay in completion of the documents. (Due to) the negligence on the part of executive authorities of the Ministry of Law, which has caused the delay, an approximate loss of more than Rs113bn has been caused to the national exchequer up to April 2012,” the regulator said, quoting a report of judicial commission, headed by a former judge of the Supreme Court, Rehmat Hussain Jafferi.

Published in Dawn, June 28th, 2016