'A lot has gone wrong': PM's aide slams IPPs for 'obstructing' regulators during audit reviews

As the incumbent government continues efforts to review agreements with the independent power producers (IPPs) amid concerns over rising electricity tariffs, Special Assistant to Prime Minister on Power Muhammad Ali has denounced the power firms for "not allowing regulators to audit their books".

"No heat rate audit of IPPs ever carried out in this country," says Ali who along with sector officials and an economist, addressed the contentious issue of agreements with power producers during Geo News's talk show "Aakhri Mauqa: Pakistan Kay Liye Kar Dalo".

Among the participants are Special Assistant to Prime Minister on Power Muhammad Ali, former SAPM on China-Pakistan Economic Corridor (CPEC) Khalid Mansoor, former caretaker minister Gohar Ejaz, former chairman of All Pakistan Textile Mills Association (APTMA), Asif Inam, economist Ammar Habib Khan and CEO of Lucky Electric Power Rohail Muhammad. 

The federal government was under immense pressure to reconsider its power purchase agreements (PPAs) with the power plants following outcry across the country as the addition of capacity payment charges inflated the power bills beyond the affordability of the inflation-burdened masses. 

In the debate anchored by senior journalist, analyst and anchor Shahzeb Khanzada, the special assistant addressed the public outcry over skyrocketing electricity bills and the ongoing debate surrounding capacity payment charges (CPC) to IPPs.

During the show, Ali said that in 2012, the Securities and Exchange Commission Of Pakistan (SECP) — as a regulator of Pakistan's corporate sector — wanted to audit the IPPs' books on excessive profit but the latter resisted and brought stay order from the court.

Similarly, he said, the power firms also did not allow the National Electric Power Regulatory Authority (Nepra) to conduct a "heat rate audit" of them. "If the matter was kosher so why they [IPPs] did not let that happen," he said, refuting the notion that everything about the power firms was audited. He added that if IPPs would not allow the regulators to conduct the audit, they become "dysfunctional".

Speaking of the excessive profit, Ali pointed out that the 2002 regime was a cost plus one, according to him in which, the government was responsible for the full cost of electricity, including the salaries, insurance and spare parts.

"Under that regime, they were getting a 15% internal rate of return (IRR) in dollars," he said, noting that if the return is more than the agreed-upon one it means "they were making more."

"These things must be rationalised. It has to be a fair deal for everyone including the government, the consumers and the IPPs," he added.   

Capacity payments

The panellists also shed light on the burgeoning burden of capacity payments, which according to them, are one of the biggest contributors to prohibitive power tariffs.

Gohar Ejaz, a prominent businessman who had also served as a federal minister of commerce, industry and production during the caretaker set-up last year, slammed the finance minister for announcing to recover power losses from consumers instead of lifting subsidies.

He said that the government was paying Rs2,000 billion annually to the power producers in terms of capacity payments.

"They had been paying Rs32 billion each to many non-functional IPPs," he claimed, adding that the government managed to save Rs6,000 billion after closing some IPPs.

He went on to say that the nation was paying Rs1,200 billion annually to the government for several non-functional power plants.

Ejaz also claimed that the charges were "not Rs18, but Rs29.7" and the government officials were trying to manipulate the actual figures by telling the average cost of capacity payments.

The former minister claimed that there were "criminal motives" behind the installation of power plants at a double cost.

He added that coal power plants became a trouble as they are not even generating 10% electricity.

This is a developing story and is being updated with further details