Senate panel calls for review of agreement with IPPs

ISLAMABAD: The Senate’s Standing Committee on Power on Tuesday called for a thorough review of agreements with Independent Power Producers (IPPs), and proposed insulating those consuming 200-units monthly from tariff increases, along with provision of a single-tier benefit.

The panel also expressed dismay over the Power Division’s “intricate and confused” policies concerning relief for domestic power consumers. It urged formulation of policies to save vulnerable classes from daily tariff hikes. For controlling the power theft, the distribution companies have done nothing, it added.

The committee was convened here to discuss the recent surge in electricity rates, which has sparked civil unrest and discontent among the general population. During the meeting, the committee received a detailed briefing from the Power Division.

Senator Saifullah Abro emphasised that resolving the nation’s energy crisis requires a comprehensive review of IPP agreements, price re-evaluation within legal bounds, and improved oversight to prevent over-invoicing. He also stressed the importance of examining the energy infrastructure for clauses related to misinformation and fraud.

The committee expressed concerns about the IPPs payment criteria. It demanded transparency, criticising the absence of a 10-year payment breakdown, and castigated the Central Power Purchasing Agency (CPPA) for lacking financial detail knowledge. The committee emphasised that qualified appointments within the Power Division are essential to address the public’s relief needs.

It was appraised that there are a total of 104 IPPs and 34 out of 46 IPPs have signed the IPP relief agreement where tariff rates are being revised.

Senator Bahramand Khan Tangi said that the employees of power distribution companies are involved in corruption and also facilitating people in power theft and nobody is making them accountable. Officials of the Power Division conveyed that the Ministry of Finance is in negotiations with the International Monetary Fund (IMF). “We have to operate within the parameters of the Fund-agreed framework.”

In response, Tangi asked whether the IMF had stopped them from controlling power theft and default.

The committee sought details on the breakdown of 44,943 MW installed capacity, but the Power Division was unable to provide an answer. The panel was informed that the current infrastructure could support a total consumption of 26,000 MWs.

The Power Division also disclosed that even during the annual maintenance of their plants, the IPPs were paid capacity charges.

The committee further inquired about the IPPs’ demand for capacity payments, to which the ministry once again failed to provide a response. Officials indicated that the public would benefit from revised agreements with the IPPs. The committee sought detailed data on the IPPs, estimated figures of tariff and the basis on which it was earlier finalised.

It also inquired about the policies addressing electricity theft and illegal “kunda” connections. Officials reported 78,000 FIRs filed and complaints against 12,000 individuals.

During deliberations on the rebasing of the financial year 2022-23, the committee was informed that 63.5 percent of total domestic consumers would experience no tariff increase. Additionally, 31.6 percent of total domestic consumers would see their tariffs rise from Rs3 to Rs6.5 per unit. Furthermore, 4.9 percent of the domestic consumers would face a tariff increase of Rs7.5 per unit. The average tariff increase for domestic consumers would amount to Rs3.82 per unit, while all other categories would experience a tariff increase of Rs7.5 per unit.

During discussions concerning the budgeted subsidies for the fiscal year 2024, the committee revealed that a total subsidy of Rs976 billion has been allocated for the power sector. Of this amount, Rs158 billion is designated for distribution companies, Rs169 billion is allocated for the KE (Karachi Electric), and Rs82 billion is earmarked for interest-related expenses of the Power Holding Company. An additional subsidy of Rs126 billion is included specifically for the KE.