Ministry, KE to hold 2nd round of talks on 12th

MUSHTAQ GHUMMAN

ISLAMABAD: Ministry of Water and Power and K-Electric will hold the second round of talks on August 12, 2015 and agree on a new set of conditions for the continuation of supply of 650MW from the national grid, well informed sources told Business Recorder.

On July 2, 2015 a meeting between the Ministry of Water and Power team led by Minister for Water and Power, Khawaja Asif and K-Electric delegation failed to reach a conclusion due to the Minister’s accusation that the management of K-Electric received illegal financial benefits during the PPP government and warned that those benefits would not be available to it in future. He also accused the utility of hiring scions of politicians on hefty financial packages to ensure that the benefits continue.

The government team gave one week’s time to K E management to present a detailed investment plan to include the current status of distribution and transmission systems along with problems and a timeframe for an overhaul of the system.

Water and Power Ministry maintains that if KE brings a plan acceptable to the government, then the expired Power Purchase Agreement (PPA) will be renegotiated; otherwise supply of 650 MW will be suspended. However, analysts argue that the government will not go to the extent of cutting off the entire 650 MW supply.

According to National Electric Power Regulatory Authority (Nepra) the financial impact of withdrawal of 650 MW by KE from NTDC at basket rates resulted in undue benefits to KE and consequently created serious financial implications for NTDC and the sector as a whole. In addition to waiver of Rs 31 billion rupees payable by KE to NTDC by ECC in year 2009 - the difference between basket rate and marginal cost - the analysis of data on the basis of benchmarks/assumptions of NEPRA for the year July, 2012 to June 2013 shows that NTDC incurred a cost of around Rs 106 billion for the supply of 650 MW to KE and it could only invoice/bill KE for around Rs 42 billion due to an ECC decision to supply at basket rates implying thereby that the additional cost of around Rs 64 billion was borne by other distribution companies and their consumers across Pakistan.

An analysis of data for the year July 2013 to June, 2014 revealed that NTDC incurred a cost of around Rs 111 billion to supply 650 MW to KE and it could only invoice/bill KE for around Rs 43 billion which implied that additional cost of around Rs 68 billion was borne by other distribution companies and their consumers across Pakistan. In addition to that, KE saved around Rs 7 billion in losses as a result of supply of electricity from NTDC at basket rates for the year 2012-13; and the same amount was saved by KE for the year 2013-14.

KE, GoP and Monitoring Committees (consisting of one representative each from the Federal Ministry of Finance, Federal Ministry of Water and Power and the Privatisation Commission) failed to follow the applicable and mandatory provisions of Implementation Agreement (IA) in letter and spirit. The IA was headed by Advisor to Prime Minister on Finance, Revenue, Economic Affairs & Statistics (now Finance Minister) and comprised of Minister for Water & Power, Minister for Privatisation, Minister for Overseas Pakistanis, Advisor to Prime Minister on Petroleum and Natural Resources (now Finance Minister) and Minister for State for Industries and Production. KE management recently squabbled with Nepra on the assumption that billions of rupees loss has been inflicted on the federal government through the sale of 650MW at Discos’ rate; official relations between the utility and the regulator have worsened after the latter issued a show-cause notice to KE for poor performance.

Senate Standing Committee on Water and Power headed by Senator Iqbal Zafar Jaghra also decided to conduct a performance audit of K-Electric through Auditor General of Pakistan aimed at judging the performance of the utility in previous years.