Demand for gas supply to captive power plants rejected

Published January 30, 2021
The government on Friday rejected a demand of the industrial sector for continuation of gas supply to their captive power plants by suspending its recent decisions. — Reuters/File
The government on Friday rejected a demand of the industrial sector for continuation of gas supply to their captive power plants by suspending its recent decisions. — Reuters/File

ISLAMABAD: The government on Friday rejected a demand of the industrial sector for continuation of gas supply to their captive power plants by suspending its recent decisions but promised to facilitate fresh electricity connections and improved power supplies.

According to an official statement, this was the outcome of a meeting at the ministry of energy’s petroleum division. The meeting was attended by a business delegation comprising representatives of the Federation of Pakistan Chambers of Commerce and Industry and the presidents of different associations of industrial areas in Karachi. The government side was represented by Sindh Governor Imran Ismail, Special Assistant to the Prime Minister on Petroleum Nadeem Babar, SAPM on Power Tabish Gohar, the petroleum secretary and the managing director of the Sui Southern Gas Company.

The business delegation was told that based on recommendations of the Cabinet Committee on Energy (CCOE), the federal cabinet had approved a moratorium on gas supply to industrial units for self-generation of electricity.

The cabinet has directed the energy minister that date for disconnection of gas supplies to captive power plants (CPPs) of non-export industry will be Feb 1, 2021 and the date for disconnection of gas supplies to CPPs of export industry will be March 1.

Govt promises to facilitate fresh electricity connections, improved power supply to industries

The cabinet also decided that “for those units who have electricity connections but their sanctioned load is less than their requirement, they would be required to immediately apply for enhancement of load and the respective DISCOs shall be required to provide such enhancement expeditiously”. Until such enhancement, they would be provided gas provided they would first fully utilise their existing sanctioned load and once the load enhancement is done, gas connection will be disconnected.

Under the cabinet directive, before disconnecting gas supply to these industrial units, the relevant Disco would confirm in writing its technical ability to serve the sanctioned power load.

The CPPs of export or non-export industry not-connected with power grid (having no electricity connections) will submit applications to respective Disco for grid connectivity by March 31 and the Discos will expeditiously process the applications and in any case before December. Until the electricity connection is operative, the gas companies will not disconnect gas supplies to such units which have applied for a connection by the due date but have not been provided the same by the Discos.

If a captive power plant having co-generation facility claims to be a co-generation unit, it will make such declaration latest by Feb 1 and the National Energy Efficiency Conservation Agency (NEECA) will conduct a third party audit of such CPPs of export/non-export industry within three months to avoid rent seeking capacity against continued gas supply to such units.

If the audit confirms co-generation facility, gas supply will continue but otherwise it will be disconnected. The power division will finalise detailed and transparent mechanism for third party audit within one week.

These decisions were shared with the business delegation, SAPM Gohar said, adding that Pakistan had overcapacity in terms of power generation and circular debt was a basic economy issue and connecting the industries with national grid would help reduce the burden of take-or-pay charges on the government.

Further, he said, the incumbent government had announced the electricity tariff support package whereby all industries would be provided discounted rate on power tariffs on incremental usage of electricity for the next three years.

He added that the government was bringing improvement in the power sector through bold policy decisions.

Mr Gohar said that the Discos would expeditiously process new connections and load enhancement applications for industries and ensure quality of supply to industry.

SAPM Babar explained that the decision was based on the fact that consumption of scarce natural gas in inefficient CPPs was a big national loss. On the other hand, the surplus power generation capacity could be absorbed in these industrial units at competitive rates. He told the business delegation that the issue of gas supplies to the CPPs had been under discussion for last 10 years.

He added that gas allocation management policy 2005 clearly stated that the gas supplies to the CPPs would be made on as/when available after meeting the requirement of other consumers. He said that even new policy also exempted captive power plants with co-generation since they had much higher combined efficiency.

Mr Babar also assured that gas supply to the industrial units, which were not currently connected to the power grid or were not supplied electricity connection that was sufficient for their needs, would not be disconnected immediately. He said that the government would request them to shift from gas-based captive power generation to the national power grid by December.

At the conclusion of the meeting, the governor said that joint efforts by the industrialists and the federal government would ramp up the progress and development of the country, an official statement said.

SSGC’s clarification on moratorium

Meanwhile, the SSSG has clarified that in the light of a recent announcement by the government about a moratorium on gas supply to industrial units for self-generation of electricity, gas supply to two categories of industrial customers having contracts with the SSGC for power generation (export / non-export) will not be disconnected unless the relevant Discos / K-Electric confirm in writing their technical ability to serve the sanctioned power load.

These two categories are those industrial units which have no electricity connection and others which are supplied electricity less than their requirement.

All such captive power plants will apply for load enhancement / grid connectivity to relevant Discos / K-Electric in compliance with the directives of the cabinet.

Published in Dawn, January 30th, 2021

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