ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) on Wednesday expressed concern over a negative campaign against investment contracts in the power sector and warned that distribution companies might face an existential threat if they do not adopt emerging new technologies.

“You cannot forcefully revisit contracts. It has repercussions and costs in the future,” Nepra’s Member Law Amina Ahmed said at a public hearing on the application of Rs2.63 per unit additional fuel cost to consumers of all Discos on account of electricity consumed in June.

She said the situation was different when contracts were signed with independent power producers (IPPs). “That is a closed transaction,” she said, adding that if someone considered it a mistake, then it should be settled in the first place that it was a mistake, and then a request could be made, but legally, you cannot open these transactions“.

She argued that a proper study should be conducted to reform as most of the generation plants were owned by the government. Ms Ahmed said many of Pakistan’s current problems are caused by vilification campaigns against contractual obligations.

Advises Discos to adopt latest technologies for survival

Nepra’s Technical and Consumer Affairs Member Rafique A Shaikh also criticised certain media outlets for scandalising extensions in power contracts of some of the IPPs despite the fact that nothing would be paid to these plants except the electricity units they provide to the grid on a ‘take & pay basis’.

They do not involve capacity payments, foreign exchange or other costs except energy price per unit and were allowed extension only for technical reasons without any adverse impact on tariff.

Chief Executive Officer of Central Power Purchasing Agency (CPPA) Rehan said a small IPP had become the subject of criticism for extending its generation licence, although it had a valid implementation and power purchase agreement until 2031. The extension in the generation licence had “no tariff impact, was not operational, and was under suspension.”

Mr Shaikh observed that the regulator was uncomfortable with high consumer tariffs, but this was linked to the unfavourable macroeconomic conditions the country is currently facing.

He said Discos could face closure if they don’t adjust to ground realities and emerging technologies like solar power, developments in storage batteries, the looming Competitive Trading Bilateral Contracts Market (CTBCM) and free rooftop solar plants being provided by the Sindh and Balochistan governments.

Nepra’s Tariff and Financials Member Mathar Niaz Rana said new power contracts should not be signed for 25-30 years as the electricity market rapidly changes annually and every five years.

Nepra Chairman Waseem Mukhtar advised the power companies to conduct a detailed study on the number of industries installing up to two-megawatt solar plants inside their premises and using grid power only for backup.

He pleaded for Rs2.63 per unit additional fuel cost adjustment (FCA) for all the ex-Wapda Discos to extract about Rs34.38 billion more from consumers in the next billing month for electricity they consumed in June.

He said the CPPA had originally sought Rs2.10 per unit additional FCA for June consumption, with an additional fiscal impact of Rs27.5bn.

Published in Dawn, August 1st, 2024