Latest news with #KaziCommitteeMethodology
Business Recorder
a day ago
- Business
- Business Recorder
Federal govt and provinces: Senate body seeks ‘out of box' fix for NHP dispute
ISLAMABAD: The Senate Standing Committee on Power headed by Senator Mohsin Aziz is scheduled to meet on Monday (today) to find out an 'out of box' solution on the dispute on Net Hydel Profit (NHP) between Federal Government and provinces, particularly Khyber Pakhtunkhwa. The Water and Power Development Authority (WAPDA) has reportedly distanced itself from the proposal of out of box solution of current controversy on NHP. Minister for Planning, Development and Special Initiative, Ahsan Iqbal is also heading a committee on this issue. Ministry of Energy (Power Division) is represented by the CEO of CPPA-G and the MD of PPMC The Committee has convened five meetings attended by the representatives of all four Provinces, the Ministry of Energy (Power Division), the Finance Division. Further update on the finalisation may be shared by the Ministry of IPC. KP formulates strategy aimed at recovering NHP dues According to WAPDA, the Council of Common Interests (CCI) based on Article 161(2) of the Constitution determines the sale rate at Bus Bar of hydel power stations. However, calculating NHP has been tricky due to conflicting claims and interpretations of the Kazi Committee Methodology. Various attempts have been made to resolve this, including ad-hoc payments and arbitration, but a long-term solution remains unresolved. After power sector restructuring and becoming NEPRA licencee, WAPDA paid Rs. 6 billion annually to the Govt, of KP as NHP until FY 2014-15, which was later uncapped at Rs 1.10 per kWh by NEPRA in FY 2015-16, following GoKP's request for settlement of all previous NHP arrears by making payments of Rs.70 billion in four installment and notification of uncapped NHP rate of Rs 1.10/kWh-an MoU was signed between Govt of Pakistan and Govt. of KP on February 25, 2016. The MoU was also approved by CCI on February 29, 2016 and later the settlement of Govt of Punjab's claims of Rs.82.71 billion and payment of regular NHP at uncapped rate was also agreed and approved by CCI on December 16, 2016. Despite paying NHP at the uncapped rate that was further enhanced by NEPRA from Rs.1.10/kWh to Rs.1.155/kWh in FY 2017-18 and CCI's overriding of its earlier decision of Jan 1991 regarding KCM through approving the said MoU, the GoKP again raised the issue in CCI and asked for payment of NHP as per KCM. WAPDA argues that considering Deputy Chairman, Planning Commission's report (suggesting WAPDA's replacement with CPPA-G for NHP obligations), ECC's decision of January 24, 2019 (Power Division to lead efforts to secure financing for NHP payments to provinces) and Finance Minister's remarks during 49th CCI meeting (Finance Division is working on clearing NHP outstanding dues of KPK and Punjab, and in future CPPA-G will directly pay NHP to provinces), the Power Division and CPPA-G are in better position to propose an out of box solution for NHP payment . WAPDA doesn't profit from selling power at hydel stations, as NHP is a pass through item and makes the NHP payment to provinces as per government guidelines and regulations. WAPDA's outstanding recovery from CPPA-G against power sales invoices has sharply increased due to delayed payments, hindering WAPDA's ability to make timely NHP payments to provinces, despite regular billing at NEPRA-determined rates. Currently, WAPDA has to pay NHP of Rs.49.565 billion to GoKP and Rs. 114.584 billion (including Rs. 13.617 billion as NHP arrears) to GoPb. WAPDA maintains that Power Division and CPPA-G are in better position to propose an out of box solution for NHP payment. Power Division (Power Planning & Monitoring Company): PPMC has offered the following comments: (i) Article 161(2) of Pakistan's 1973 Constitution requires that net profits from hydroelectric power generation be paid to the province where the power station is located, calculated by deducting operating expenses from bus bar revenue, and explicitly excludes Net Hydel Profit (NHP) as a pass-through cost to electricity consumers ;(ii) KCM calculates NHP by aggregating power generation income, but this approach, formulated in 1985-86 was based on a unified and unbundled WAPDA being the sole power producer and distributor. Now, Pakistan's energy landscape has changed significantly including WAPDA's unbundling, emergence of IPPS, and shifts in the power mix wherein hydro power contributes 27% (approx.) ;(iii) NHP payments should be made through the federal budget or covered by WAPDA's profits from hydropower sales, rather than consumers; (iv) commenting on GoKP's proposal, PPMC is of the view that the transfer of hydropower plants to provinces is governed by the Power Generation policies of 1995 and 2015 that is applicable to BOOT-based IPP projects developed within a province by private sponsors. The WAPDA Act lacks provisions for transferring hydropower plants constructed under its mandate to the provinces, and its projects are primarily financed through PSDP, donor loans, and internal funds, after accounting for NHP; (v) NHP payment through ESCROW account, does not align with the legal and regulatory framework and the constitutional scheme. Regarding wheeling of power from PEDO and wheeling charges determination, B2B electricity supply through wheeling arrangements will be integrated into IGCEP and TSEP under the CTBCM Directive No. 7. NEPRA's periodical regime, determined water usage charges should be reviewed based on the mechanism applied in various countries. Government of Sindh: The Provincial Government submitted proposal regarding transferring Hydro Electric Stations to the respective provinces in lieu of NHP requires clarification as presently no hydro power station is managed in IPPs mode. It further stated that the hydro-electric power generation is a bi-product of 'Water Reservoir Projects (Dams)'. While framing any such proposal, the basic purpose of construction of these reservoirs be considered and IRSA be included in the committee. Govt of Sindh further contended that transfer of Hydro Electric Stations to provinces requires careful consideration of the primary purpose of water reservoir projects. To ensure a comprehensive approach, it is suggested to include representatives from IRSA, Finance Division, and Economic Affairs Division in the committee to provide technical, financial, and economic expertise. Govt of Sindh has reiterated its earlier stance on NHP, reflected in the minutes of 49th CCI meeting which is as follows; 'Chief Minister, Punjab endorsed views of DCPC and asked for early payment of Rs. 58 billion dues of NHP owned to Punjab. The Chief Minister, Sindh, endorsed the NHP claim of Chief Ministers of Khyber Pakhtunkhwa and Punjab being constitutional. He, however, did not support increase in tariff and its passing on to consumers. He said that since profit was utilized by WAPDA it should now be accounted for'. Copyright Business Recorder, 2025
Business Recorder
a day ago
- Business
- Business Recorder
Federal government and provinces: Senate body seeks ‘out of box' fix for NHP dispute
ISLAMABAD: The Senate Standing Committee on Power headed by Senator Mohsin Aziz which is scheduled to meet on Monday (today) to find out an 'out of box' solution on the dispute on Net Hydel Profit (NHP) between Federal Government and provinces, particularly Khyber Pakhtunkhwa. The Water and Power Development Authority (WAPDA) has reportedly distanced itself from the proposal of out of box solution of current controversy on NHP. Minister for Planning, Development and Special Initiative, Ahsan Iqbal is also heading a committee on this issue. Ministry of Energy (Power Division) is represented by the CEO of CPPA-G and the MD of PPMC The Committee has convened five meetings attended by the representatives of all four Provinces, the Ministry of Energy (Power Division), the Finance Division. Further update on the finalisation may be shared by the Ministry of IPC. KP formulates strategy aimed at recovering NHP dues According to WAPDA, the Council of Common Interests (CCI) based on Article 161(2) of the Constitution determines the sale rate at Bus Bar of hydel power stations. However, calculating NHP has been tricky due to conflicting claims and interpretations of the Kazi Committee Methodology. Various attempts have been made to resolve this, including ad-hoc payments and arbitration, but a long-term solution remains unresolved. After power sector restructuring and becoming NEPRA licencee, WAPDA paid Rs. 6 billion annually to the Govt, of KP as NHP until FY 2014-15, which was later uncapped at Rs 1.10 per kWh by NEPRA in FY 2015-16, following GoKP's request for settlement of all previous NHP arrears by making payments of Rs.70 billion in four installment and notification of uncapped NHP rate of Rs 1.10/kWh-an MoU was signed between Govt of Pakistan and Govt. of KP on February 25, 2016. The MoU was also approved by CCI on February 29, 2016 and later the settlement of Govt of Punjab's claims of Rs.82.71 billion and payment of regular NHP at uncapped rate was also agreed and approved by CCI on December 16, 2016. Despite paying NHP at the uncapped rate that was further enhanced by NEPRA from Rs.1.10/kWh to Rs.1.155/kWh in FY 2017-18 and CCI's overriding of its earlier decision of Jan 1991 regarding KCM through approving the said MoU, the GoKP again raised the issue in CCI and asked for payment of NHP as per KCM. WAPDA argues that considering Deputy Chairman, Planning Commission's report (suggesting WAPDA's replacement with CPPA-G for NHP obligations), ECC's decision of January 24, 2019 (Power Division to lead efforts to secure financing for NHP payments to provinces) and Finance Minister's remarks during 49th CCI meeting (Finance Division is working on clearing NHP outstanding dues of KPK and Punjab, and in future CPPA-G will directly pay NHP to provinces), the Power Division and CPPA-G are in better position to propose an out of box solution for NHP payment . WAPDA doesn't profit from selling power at hydel stations, as NHP is a pass through item and makes the NHP payment to provinces as per government guidelines and regulations. WAPDA's outstanding recovery from CPPA-G against power sales invoices has sharply increased due to delayed payments, hindering WAPDA's ability to make timely NHP payments to provinces, despite regular billing at NEPRA-determined rates. Currently, WAPDA has to pay NHP of Rs.49.565 billion to GoKP and Rs. 114.584 billion (including Rs. 13.617 billion as NHP arrears) to GoPb. WAPDA maintains that Power Division and CPPA-G are in better position to propose an out of box solution for NHP payment. Power Division (Power Planning & Monitoring Company): PPMC has offered the following comments: (i) Article 161(2) of Pakistan's 1973 Constitution requires that net profits from hydroelectric power generation be paid to the province where the power station is located, calculated by deducting operating expenses from bus bar revenue, and explicitly excludes Net Hydel Profit (NHP) as a pass-through cost to electricity consumers ;(ii) KCM calculates NHP by aggregating power generation income, but this approach, formulated in 1985-86 was based on a unified and unbundled WAPDA being the sole power producer and distributor. Now, Pakistan's energy landscape has changed significantly including WAPDA's unbundling, emergence of IPPS, and shifts in the power mix wherein hydro power contributes 27% (approx.) ;(iii) NHP payments should be made through the federal budget or covered by WAPDA's profits from hydropower sales, rather than consumers; (iv) commenting on GoKP's proposal, PPMC is of the view that the transfer of hydropower plants to provinces is governed by the Power Generation policies of 1995 and 2015 that is applicable to BOOT-based IPP projects developed within a province by private sponsors. The WAPDA Act lacks provisions for transferring hydropower plants constructed under its mandate to the provinces, and its projects are primarily financed through PSDP, donor loans, and internal funds, after accounting for NHP; (v) NHP payment through ESCROW account, does not align with the legal and regulatory framework and the constitutional scheme. Regarding wheeling of power from PEDO and wheeling charges determination, B2B electricity supply through wheeling arrangements will be integrated into IGCEP and TSEP under the CTBCM Directive No. 7. NEPRA's periodical regime, determined water usage charges should be reviewed based on the mechanism applied in various countries. Government of Sindh: The Provincial Government submitted proposal regarding transferring Hydro Electric Stations to the respective provinces in lieu of NHP requires clarification as presently no hydro power station is managed in IPPs mode. It further stated that the hydro-electric power generation is a bi-product of 'Water Reservoir Projects (Dams)'. While framing any such proposal, the basic purpose of construction of these reservoirs be considered and IRSA be included in the committee. Govt of Sindh further contended that transfer of Hydro Electric Stations to provinces requires careful consideration of the primary purpose of water reservoir projects. To ensure a comprehensive approach, it is suggested to include representatives from IRSA, Finance Division, and Economic Affairs Division in the committee to provide technical, financial, and economic expertise. Govt of Sindh has reiterated its earlier stance on NHP, reflected in the minutes of 49th CCI meeting which is as follows; 'Chief Minister, Punjab endorsed views of DCPC and asked for early payment of Rs. 58 billion dues of NHP owned to Punjab. The Chief Minister, Sindh, endorsed the NHP claim of Chief Ministers of Khyber Pakhtunkhwa and Punjab being constitutional. He, however, did not support increase in tariff and its passing on to consumers. He said that since profit was utilized by WAPDA it should now be accounted for'. Copyright Business Recorder, 2025
Business Recorder
10-07-2025
- Business
- Business Recorder
NHP methodology, power projects' transfer: Wapda, provinces continue to have serious differences
ISLAMABAD: The Water and Power Development Authority (Wapda) and provincial governments continue to have serious differences regarding the methodology of Net Hydel Profit (NHP) and the transfer of power projects to respective provinces, sources in the Ministry of Planning, Development, and Special Initiatives told Business Recorder. Sharing the details, sources said that a Technical Committee comprising representatives from Wapda and the provinces is holding discussions to evolve a consensus on a workable formula. During the 5th meeting of the Committee held on January 10, 2025, it was agreed that members would furnish firmed-up proposals to be discussed in the next meeting. Based on input from stakeholders, a report will be submitted to the Council of Common Interests (CCI). KP demands Re1/unit hike: NHP: centre-provinces row reignites As per the decision, the provincial governments, Wapda, and Power Planning and Monitoring Company (PPMC)—representing the Power Division, Ministry of Energy— submitted written comments along with their proposals, which are as follows: Govt of Khyber Pakhtunkhwa (GoKP): The provincial government emphasised to make the payments of NHP as per Kazi Committee Methodology (KCM), which was approved by the National Finance Commission (NFC) in 1988, Federal Cabinet in 1990, and the CCI in 1991, and its validity was further reinforced by the Supreme Court's 1997 judgment in the Gadoon Textile Case and being a constitutional right under Article 161 (2) of the Constitution. The GoKP has proposed a second interim arrangement to settle the outstanding dues by increasing the electricity tariff by Rs.1/ kWh. Additionally, the federal government reiterated its earlier stance of transferring the hydro power stations to the respective provinces. Regarding delay in NHP payments, the GoKP pointed out that Wapda is no longer a revenue collecting agency for the power sector, as CPPA-G is acting as a collecting agency of the federal government; therefore, the payment should be made by CPPA- G, under Power Division. Govt of KP presented following three proposals: (i) payment of NHP by federal government as guaranteed under Article 161 (2) of the Constitution, Presidential Order No 3, decisions of CCI from 1993 to 2022 and subsequent calculations made by Jahanzeb Committee in the report approved by CCI December 23, 2019. Federal government may consider financing of power component of a hydro power station from PSDP on the analogy of Dam component. Proposal ii: so that the revenues generated may be made available for NHP payments to the entitled provinces transfer the existing Hydro Power stations, currently owned by Wapda, to the respective provinces, as was previously proposed by GoPb. The Power Generation Policies of 1995 and 2015 otherwise allow transfer of power stations to the provinces. Federal government may pay the outstanding NHP payments as per KCM to the provinces till the transfer of hydro power stations to the provinces. O&M can be retained by Wapda. Proposal iii: Till the finalization options, the federal government may announce a 2nd interim arrangement of NHP payment by increasing consumer end tariff by Rs. 1/ KWh to generate the requisite funds. Instead of Wapda, CPPA-G may directly pay NHP to the entitled provinces through ESCROW account. By determining wheeling charges based on the rate of power wheeling from Pehru Hydropower Station, PEDO be facilitated to wheel up to 1,500 MW of power, facilitating its sale through electricity wheeling. Water Usage Charges may also be enhanced to Rs. 3/ kWh. Government of Punjab: Government of Punjab mentioned that mandate of the Committee, constituted by CCI in its 41st meeting due to divergent viewpoints on KCM, was later changed through revised minutes by amending the original ToRs; i.e., 'determine an out of box solution/ methodology to determine net hydel profit' to 'propose an out of box solution for the payments of net hydel profit to entitled provinces. Therefore, Punjab maintains that without addressing the methodology issue for NHP calculation under Article 161 (2), NHP payments to the provinces cannot be resolved. As per Article 161 (2) of Constitution, CCI is to determine the revenues from bulk power supply at hydro-electric stations. However, the KCM considers the average basket price, incorporating various energy sources & factors and only accounts for the electricity losses at the point of generation, neglecting additional losses incurred during transmission, distribution, and commercial operations. Therefore, KCM is non-implementable and violative of the Constitution. Power generation mix has shifted significantly over time, with hydel's share decreasing from 60% to 23% and thermal power becoming the dominant source, accounting for 70% of total generation. Besides this, certain factors such as Energy Purchase Price (39% of tariff), Capacity Purchase Price (61% of tariff), Distribution & Supply margins, transmission charges, Market Operation Fee, and Prior Years adjustments, along with various types of taxes, contribute towards the tariff and average unit price of electricity, although these cannot be considered part of the revenue. As per minutes of 41st & 49th CCI meeting, electricity tariff is expected to increase significantly, from Rs.4.50 to Rs.7.50, alongside a rising circular debt projected to reach Rs.7 trillion by 2030. Copyright Business Recorder, 2025
