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K-Electric-SSGC dispute remains unresolved

Updated August 17, 2018


ISLAMABAD: The two Karachi-based power and gas utilities – K-Electric and Sui Southern Gas Company Ltd – have been unable to settle their differences over gas supply for power generation despite the federal government’s facilitating intervention about five months ago.

The utilities blamed each other for the failure on Thursday at a public hearing presided over by the National Electric Power Regulatory Authority (Nepra) Chairman Tariq Saddozai, who noted that the consumers in Karachi would be the ultimate sufferers of higher rates and power cuts.

The KE authorities said that the SSGCL was reluctant to commit any quantity for supply of local gas for cheaper power generation at its power plants under the gas sales purchase agreement (GSPA).

Conversely, the SSGCL authorities alleged that KE had become habitual of trying to settle issues through courts instead of sitting on the table to find amicable solutions.

The hearing was arranged to formalise utilisation of imported RLNG (re-gasified liquefied natural gas) for power generation by KE as alternative fuel and set its rates for which it had given interim permission to KE in June this year.

Mr Saddozai said the burden of inability of the two utilities would have to be borne by the consumers who would also suffer in case KE received lower gas quantities.

KE reported that the cabinet committee on energy had allowed in April this year to use 60mmcfd RLNG to operate power plants on alternate fuel. KE had requested SSGCL to enhance supply of local gas for cheaper electricity, the Nepra was informed. As a consequence, KE had been not been able to sign GSPA with SSGC. KE was using 130mmcfd gas for power plants to generate electricity.

KE representatives further informed during the hearing that SSGCL authorities had conveyed that they would provide gas to KE power plants on an availability basis, without committing any firm quantities.

Chairman Nepra has directed KE to submit its techno-economic analysis, as the power utility reported that its new plants would run on RLNG for which discussions were under process. He said the diesel-based power generation cost would be Rs21, compared to Rs13 per unit on RLNG, adding that the KE should apply for tariff for its diesel-based plants since their infrastructure is in place.

The representatives of SSGCL informed during the meeting that demand of consumers in the domestic sector has increased and gone up further in winters, and hence it could not guarantee a firm supply for power generation. They said the power utility should sit on the table for a way out instead of going to the courts as it prolongs resolution.

Led by former prime minister Shahid Khaqan Abbasi, the Cabinet Committee on Energy (CCoE) had ordered the Sui Southern Gas Company (SSGCL) on April 23 to increase gas supply to KE under an arrangement of 130mmcfd of natural gas and 60mmcfd of RLNG to meet KE’s minimum gas requirement of 190mmcfd.

On the basis of this decision, KE had filed an application before Nepra on April 30, seeking inclusion of RLNG as an alternative fuel with effect from the date of CCoE’s directives when it started operating its concerned power plants on RLNG.

In its interim order in June this year, the power-sector regulator has allowed K-Electric to use imported RLNG as an alternative fuel for power generation, but on the condition that it will first consume a minimum 180mmcfd of locally produced gas.

The permission had been granted on a provisional basis to ‘provide immediate relief to end-consumers’ until a normal legal and procedural process were put in place.

The KE’s application cites that RLNG as alternate fuel would improve availability of power plants and reduce load shedding. It had said its own power plants had a total generation capacity of about 1,900MW of which about 915MW were dependent on natural gas of at least 180mmcfd. In case of non-availability of, or lower gas supplies, the plants have to operate on diesel of furnace oil.

Some of the KE’s plants use high-speed diesel and furnace oil as alternate fuels and their replacement with RLNG is expected to reduce the power generation cost. For this, the regulator has to put in place a mechanism for fuel cost adjustments to the consumers.

A five-member inspection team of Nepra had recently found KE under-utilising its generating capacity when the residents of Karachi were suffering from power outages amid rising temperatures and had asked the government to facilitate increased gas supplies to the utility to ease public sufferings.

Published in Dawn, August 17th, 2018