ISLAMABAD, Jan 23: The National Electric Power Regulatory Authority has increased the upfront tariff for wind power projects to about 11 cents per unit, up by more than 16 per cent.

The revised tariff would increase the power purchase rate from Rs5.7 to about Rs6.7 per unit, according to a copy of the Nepra determination released on Monday. Sponsors of wind power projects (WPPs) are still not happy with the revised tariff and will meet Nepra high-ups in a couple of days to seek further increase in tariff.

Practically, the tariff for WPPs has been increased from 7.006 cents per unit (Rs4.2036) in April 2006 to 11 cents (Rs6.7) per unit, up by more than 57 per cent, on a “levelised 20-year basis”.

Nepra chairman Saeed-uz-Zafar was not available to explain the situation. His aide promised the chairman would call back. He did not.

A senior Nepra official said the levelised 20-year tariff had been put at 9.5 cents per unit but two major elements that were earlier part of the tariff would be calculated differently. The Nepra determination said the “levelised tariff of 9.5 US cents/kwh determined by the authority for wind power generation should be applicable after incorporating two changes – adjustment for customs duty to be removed and tariff to be based on LIBOR plus 300 basis points”.

He said most of sponsors of WPPs were non-professionals and had not been able to “lock-in” their equipment costs and other prices on which they had earlier agreed to the upfront tariff. He said the failure of the private sector to meet its obligations would cost consumers heavily.

He said the basic purpose of the upfront tariff was that companies should come forward and start implementing projects if they found it economically feasible. If that was not acceptable to them, they should have come and filed separate tariff petitions as required under the power policy and the alternate energy policy. Both Nepra and the Alternate Energy Development Board (AEDB) were mixing up benefits of the upfront tariff with the negotiated tariff in violation of existing laws and policies, he said.

He disclosed that though a majority of Nepra members originally opposed the upward revision in the upfront tariff, they finally agreed to it on the basis of a consideration that wind power was a new technology in Pakistan and should be facilitated in the initial stages but that the higher prices would have to be paid by consumers.

Nepra records reveal that the authority had revised the upfront tariff from 7 cents in April 2006 to a flat 9.5 cents per unit in September 2006 with certain conditions. These included that the tariff should be permissible for projects that would achieve commercial operation date before June 30, 2008, and no indexation would be allowed. Even at that time, one of the members had partially agreed to the tariff and had noted down his objections.

The official said that a couple of sponsors with a 300mw generating capacity had reached advanced stages of tariff negotiations and the AEDB had issued over 60 letters of interest but it was not clear how many of them were creditworthy and serious.

The Nepra’s latest determination said the tariff had been calculated on the basis of 31.5 per cent capacity factor. It also allowed indexations for cost of debt on the basis of London Interbank Offered Rate, instead of Karachi Interbank Offered Rate, local inflation, US CPI, foreign exchange variation, dollar-rupee value variation.

In September too, Nepra had increased the upfront tariff on the ground “that equipment cost had gone up as a result of continuous increase in steel and copper prices along with drastic increase in the demand for wind turbines”.

At a meeting on Jan 15, 2007, the AEDB chairman had said “the equipment costs have gone up during one year, therefore some of the assumptions upon which the upfront tariff for wind power generation was determined by the authority need to be revised”.

As such, he argued for “9.5 cents per unit cost after incorporating adjustment for customs duty to be removed and tariff based on LIBOR plus 300 basis points”. Nepra accepted this demand without any modification.