Nepra given 10 days to examine profits of IPPs

ISLAMABAD: A Senate panel on Thursday asked the National Electric Power Regulatory Authority (Nepra) to collect all the relevant data from the Independent Power Producers (IPPs), compare with its own record and conduct an analysis of the year-wise details of their accounting profits within 10 days and submit a report.

The three-member sub-committee of the Senate Standing Committee on Power was attended only by its convener Senator Nauman Wazir Khattak and its proceedings were concluded in almost half an hour because of hectic activity at Senate on account of no-confidence motions against Chairman and Deputy Chairman. When questioned about the quorum, Khattak explained that 33 per cent presence of the total strength of members of the committee was enough to meet the requirement.

Hub Power Company (Hubco) CEO Khalid Mansoor briefly explained the tariff process and contended that a company may have made higher investments to improve its efficiency beyond minimum guaranteed under the contract but this should not be considered something illogical.

Senator Wazir said the committee would in no circumstances disturb any contract or recommend any departure from contractual obligations but go deep into the issue to satisfy itself that profitability enjoyed by IPPs was no more than permitted under the contracts through some misrepresentation or smartness.

The committee was given a briefing on the accounting profits and return on equity under tariff by Hubco chief, explaining that the actual return on equity enjoyed by the company was no more than 7-8pc and in fact certain legitimate cost factors were disallowed by the regulator. The senator said information relating to all IPPs should be provided under an agreed format and asked the regulator to collect information about profitability of individual IPPs and its comparison with internal rate of return, return on equity and profits permissible under the approved tariff.

Sub-committee of the Stan­ding Committee on Power that met under the chairmanship of Senator Khattak further said that if some issues were found in the payments made to IPPs beyond what was permitted to them, then stern action will be taken against them. The sub-committee had been constituted to review issues of high tariff, capacity charges, heat rate and calculation of payback period of IPPs.

The committee noted that the objective of the exercise was to see if all payments and profits were in accordance with Nepra terms and conditions and no overpayments or excessive profits were being made by IPPs.

In its previous meeting, the sub-committee had observed that an overpayment of Rs955 billion has been made to the IPPs during past six years which has increased the circular debt.

While taking briefing on the extra profit by IPP Advisory Council, the committee was told that the regulator has been taken decisions according to the power policies of the government. The IPP representatives told the panel that they had also submitted all data to the debt inquiry commission constituted by the prime minister.

Khattak said that 15pc profit was allowed to Hubco before commercial operations of Hub power plant. Under 2015 power policy, specific efficiency standards had already been determined while it appeared the company had the leverage to determine its heat rate according to its own will.

He agreed that public sector efficiency was lower than private sector and one of the reasons might have been negligible expenditure on operations and maintenance. He said the committee would listen to all stakeholders and after finding their record clear, would issue them clean chit and if some ambiguities and issues come to light, it would propose stern action against them.

He further said the committee would take its final decisions with the consultation of the Nepra and finalise a report regarding capacity payments which could be submitted to any court of law.

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