LAHORE, March 12: The Pakistan Electric Power Company (Pepco) has put the Karachi Electric Supply Company (KESC) on notice and advised the power utility to immediately pay Rs3 billion and submit a comprehensive plan for payment of the remaining amount.

According to the new Pepco notice, the recovery of dues by customers to the KESC was not linked to the payment to the NTDC for the power purchased. It also said the KESC should enter into a power purchase agreement (PPA) for up to 300MW with the NTDC if it wished to continue to receive supply after April 1.

Currently, there is no PPA between Pepco and the KESC.

Pepco advised the KESC that if it wanted power supply from the NTDC it “must have a commercial power purchase agreement and requisite payment guarantee”.

Alternatively, Pepco informed the KESC it could purchase up to 500MW power directly from Hubco for which the company would be willing to provide an NOC and to help in working out the requisite modalities with Nepra, PPIB and Hubco provided “the KESC is … willing to enter into a PPA with Hubco on commercial terms with requisite guarantees and payment terms”.

The KESC now has two options — it can make immediate part payment of Rs3 billion, submit a payment plan to Pepco / NTDC and enter into a PPA by April 1 or purchase up to 500MW power directly from Hubco under a commercial agreementwith requisite guarantees, a Pepco spokesman said on Wednesday.

This is in accordance with the Nepra-determined tariff of NTDC which states that the KESC is a vertically-integrated utility and has not yet sought that its status be unbundled. Secondly, the KESC is not contributing to payment of capacity charges to the NTDC.

According to the spokesman, non-responsive attitude of the KESC management left no option for Pepco but to stop the supply of 260MW power on March 6.

The notice said the KESC system, which generated 1,800-2,000MW, collapsed without any apparent reason, most probably because of lack of contingency planning and poor operation management. “To facilitate commerce, business and the people of Karachi, Pepco restored the power supply with the limit of 100MW. However, this limit was grossly misused and as much as 290MW was drawn by the KESC.”

“Subsequently, on the reference from various quarters and citizens of Karachi, to partially alleviate loadshedding, the load limit was increased on the request of KESC operations on the night of March 7 to 200MW.”

Referring to the letter of the Ministry of Water and Power containing clear directions of the secretary, Pepco reiterated that the KESC should observe the load limit which had been provided only on an interim basis.

The Pepco spokesman said it was expected that the KESC would honour its obligations and responsibilities to its business partners as well as to the citizens of Karachi.