IPPs refuse to reduce tariff formula under govt ToRs

ISLAMABAD: Independent Power Producers (IPPs) have shown no inclination to initiate talks under the terms of reference (ToRs) handed over to them by the government to reduce the power tariff, saying that some issues are not negotiable as part of power policies supported by sovereign guarantees, The News reported on Tuesday.

"However, IPPs installed under 1994 and 2002 power policies are ready to discuss some areas wherein they can provide relief by setting aside ToRs," a high-ranking IPP official told The News. He said that foreign currency indexation in the base tariff was part of power policies 1994 and 2002. 

"And when IPPs were installed under power policy 2002, the value of USD was at Rs60 which has now increased to Rs160. The increase in value of US dollar is not the fault of IPPs, rather a result of government’s exchange rate." 

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In the past, the official said, nine IPPs gave a lot of concessions to the government by settlement agreements in view of national interest. "But the government was unable to obtain formal approval to implement them which resulted in losing of the opportunity. The Settlement Agreement was consented to by such IPPs that had won the Arbitral Award by the London Court of International Arbitration (LCIA) in 2017."

"Now we are again poised to hold talks with the government’s technical committee but not under ToRs," the official added. The government wants the IPPs to reduce the electric power tariff not only to provide relief to domestic, commercial and industrial consumers but also help the extricate central power purchaser. 

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And to this effect, the government has handed over the terms of reference (ToRs) to IPPs. According to the copy of ToRs available with The News, the PTI government wants to seek relief mainly by reviewing and analyzing Return on Equity, the impact of Foreign Currency indexation in the base tariff available to local investors, debt re-financing, Operation and Maintenance (O&M) costs, and Delayed Payment Rates (DRRs).

When contacted, Secretary Power Irfan Ali confirmed that the ToRs were handed over to IPPs but there is no indication that they do not want to discuss the ToRs. The official TOR document says that under the decision of the Cabinet Committee on Energy (CCoE) decision dated April 2, 2020, a six-member committee was constituted to deliberate and recommend viable options after negotiations with IPPs.

Originally published in The News