Govt halts capacity payments to 22 IPPs, saving Rs1.5 trillion

Express Tribune

26-02-2025

Capacity payments go to the power plants which remain idle and do not produce any electricity but consumers are compelled to pay due to the agreements signed by different governments. PHOTO: FILE
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The National Assembly's Standing Committee on Power was informed that the government has ceased capacity payments to 22 Independent Power Producers (IPPs), resulting in an overall saving of Rs1.5 trillion and expected to provide relief to consumers by reducing electricity costs by Rs4 to Rs5 per unit.
The meeting was attended by Power Secretary Dr Muhammad Fakhre Alam Irfan, who briefed the committee on the cessation of capacity payments to 14 oil-based and 8 bagasse-based IPPs.
The secretary also mentioned that efforts are underway to terminate payments to additional IPPs. The discontinuation of these payments is projected to lead to substantial savings, with consumers set to benefit from lower electricity rates, he said.
Mustafa Kamal also raised concerns over some IPPs claiming that their agreements were terminated under duress.
The power secretary responded by saying that several IPPs had violated the terms of their contracts, and these violations were pointed out by the government teams. The IPPs were given the option to either comply or face a financial audit by NEPRA (National Electric Power Regulatory Authority).
He further stated that two IPPs refused to cooperate, prompting NEPRA to initiate audits, with advertisements for the audits now published for the non-compliant IPPs.
The meeting also discussed an issue concerning the additional 7.8 million units being burdened on LESCO (Lahore Electric Supply Company) consumers. The committee decided to form a sub-committee to investigate the matter further.
Committee member Rana Mohammad Hayat expressed concerns over rising bills and increasing WAPDA (Water and Power Development Authority) expenditures over the past three to four years.
He questioned the government's response to the growing financial burden on the public and called for clarification on when relief will be provided to consumers. He also raised the issue of local coal's cost-effectiveness in electricity generation, asking for transparency regarding the potential savings.
In response, power division officials revealed that the cost of generating electricity using local coal would be Rs4 per unit, compared to Rs16 per unit when using imported coal. Electricity produced from furnace oil costs between Rs30 to Rs32 per unit.
Kamal further questioned the long-term strategy, asking about plans for the future if coal-based plants face operational issues, particularly when hydel and thermal plants are phased out in favor of coal. The power secretary reassured the committee that coal plants can be installed within a short time frame.
Furthermore, the power division is conducting modern forecasting for the next 10 years, anticipating that many of the furnace oil-based power plants will be decommissioned within the next three years.