ISLAMABAD: The government has challenged around 71-paisa per unit tariff for the 878km Matiari-Lahore transmission line determined by the power regulator as the Chinese contractor has expressed its inability to pursue the $2.1 billion project for being unviable.

A government official said the Private Power and Infrastructure Board (PPIB) — the one-window entity set up by the water and power ministry to facilitate investors — had filed a petition before the National Electric Power Regulatory Authority (Nepra) requesting it to review its decision in the interest of foreign investment so that loadshedding could end by 2018.

A Nepra official said the regulator would invite public comments in a few days before holding a public hearing to reach a prudent decision on the matter.

Nepra says it will invite comments before holding a public hearing to reach a decision on the matter

He said the mega project was the first private sector investment in the transmission line and, therefore, any decision on it would set a principle for such projects in the future.

A PPIB official said the Chinese investors had declined to go ahead with the project at the tariff and, therefore, the regulator had been requested to consider a revised tariff of about 95 paisas per unit — up by about 30 per cent.

On Aug 18, the regulator had approved the upfront tariff of 71 paisas per unit to be charged to consumers for evacuation of up to 4,950MW of electricity from Tharparkar, Hub and Karachi to load demand centres in Punjab as part of the China-Pakistan Economic Corridor. The transmission line is crucial for evacuation of electricity to be produced at three coal-based projects in Tharparkar, Hub and Port Qasim currently in development phase.

The tariff petition filed by the country’s only transmission line operator with 14,000km of operational lines — National Transmission and Dispatch Company (NTDC) — was twice rejected by Nepra in November 2015 and January this year. The authority said it was against the rules to offer an upfront tariff for a single project and also objected to the tariff being executed without competitive bidding.

However, it allowed the tariff for the project when the petition was filed by the PPIB on behalf of the NTDC along with government directives. The NTDC and the China Electric Power Equipment and Technology — a subsidiary of the State Grid Corporation of China — had already entered into a cooperation agreement in April 2015 as part of priority projects of CPEC.

Based on engineering procurement and construction cost of $1.76 billion and other cost build-ups totalling $2.1bn, the PPIB had requested Nepra for a transmission tariff of 95 paisas (0.914 cents) per unit (kWh) for 30-year life of the transmission line. It will involve 80:20 per cent debt-equity ratio.

But Nepra worked out the upfront tariff of 71 paisas per unit for 25-year operational life of the transmission line. It noted that the government had given guarantee to the Chinese firm for ensuring payment obligations of the NTDC, protection against NTDC default for any transmission service agreement or any other defaults by NTDC to the Chinese firm and protection against change in laws and political force majeure risk.

The tariff petition was prepared purely on the basis of financial and technical data received from the Chinese firm. The project will be transferred to the NTDC on completion of 25 years. The NTDC and Chinese firms had signed cooperation agreement for two similar transmission lines. Apart from Lahore-Matiari, the other project is 660kv High Voltage Direct Current (HVDC) transmission line from Port Qasim to Faisalabad with 4,000MW capacity, but that was not part of the petition.

The 660kv HVDC Matiari-Lahore transmission line will transmit generation in southern part of the country to mid-country load centres.

However, due to constraints on public sector resources and borrowing capacity of the NTDC, the government had announced a policy framework last year for transmission line development in the private sector.

The future of electricity transmission from 660MW Engro Thar coal plants, 1,320MW Sino-Sindh Resour­ces Thar coal plant, 1,320MW Port Qasim project, 660MW each of two Hub Coal Power plants and 330MW Siddique Sons Energy plant will depend on the Matiari-Lahore project.

The transmission line will mostly pass through rural land away from settlements and obstruction with least temporary loss to crops and trees to be properly compensated.

The tariff petition said the Chinese investor had been involved in the project because “currently there exist a number of lengthy, time and money consuming complicated procedures due to which private investors are problem-stricken”, like provision of bank guarantees and finalisation of project agreement with multitude of government agencies.

Moreover, the project is associated with power generation based on imported and local coal at low operating costs that will save billions of dollars every year otherwise needed for import of oil for equivalent electricity generation.

The project will take 36 to 42 months to be developed, although power generation at the plants in Thar, Hub and Port Qasim will start much earlier.

Published in Dawn, October 3rd, 2016