ISLAMABAD: National Electric Power Regulatory Authority (Nepra) is most likely to replace upcoming Thar-coal power plant’s tariff structure from upfront to competitive bidding mode by adjusting different benchmarks, well informed sources told Business Recorder.

Private Power Infrastructure Board (PPIB) which has been ostensibly given the task of arm twisting Independent Power Producers (IPPs) for seeking their overdue amounts, did not bother to send comments on new Thar coal tariff policy. However, Ministry of Water and Power has proposed a reduction of 15-20 per cent in levelized tariff of Thar coal-fired projects.

Fatima Electric Company Limited, Qureshi Law Associates and Sindh Engro Coal Mining Company also submitted their comments on different issues framed by the regulator’s technical and legal teams.

Chairman Nepra, Brig. Tariq Saddozai (retired) will preside over the public hearing scheduled for Tuesday (today).

The Sindh government had sent its comments in the past when Nepra made it clear that the current upfront tariff mechanism will not continue for future projects.

“The Sindh government had sought two months’ extension in upfront tariff mechanism on the plea that several investors are showing interest in establishment of projects in Thar,” the sources added.

The regulator will adjust tariff for Thar coal-fired projects after adjusting cost, IRR and efficiency if any and other parameters, new tariff will be announced most probably in competitive mode, the sources continued.

“The Authority will set new benchmarks along with new tariff and ask the PPIB to go for bidding of new power projects in Thar and award projects to lowest bidders so that best possible prices are attracted,” the sources added.

The upfront tariff for Thar coal based power plants was determined on July 9, 2014 which was subsequently notified by the Ministry of Water and Power on January 20, 2015. The validity of the upfront tariff was two years from the date of its notification. The tariff expired on January 19, 2017. The levelized tariff for 330MW power plants on foreign financing was 8.5015 cents for units and on local financing 9.5643 cents per unit. For 660MW power projects, the notified tariff was 8.3341 cents per unit for foreign financing and 9.5668 cents per unit for local financing. The notified levelised tariff for 1100 MW Thar-coal fired power plants was 7.9889 cents for foreign financing and 9.1368 cents for local financing.

The Authority on Jan 4, 2017 decided not to extend the upfront Thar coal tariff and initiate proceedings in respect of tariff for future projects. The Authority in its letter of January 13, 2017 also solicited Ministry of Water and Power’s point of view as to how many more MWs from Thar coal are being envisaged along with timeframe but no response was received. A reminder to the Ministry of Water and Power regarding update, spelling out the timeframe and MWs envisaged from Thar coal projects was also sent on March 15, 2017.

Ministry of Water and Power, in its comments stated that three blocks of Thar-coal are included in the CPEC and in order to provide economies of scale, each block must achieve a capacity of more than 15-20 million tons per annum which means generation of around 7,500-9,000 MW cumulatively. At present, tariff on Thar coal is available to projects of around 3,600 MWs.

Qureshi Law Associates has submitted the following comments: (i) lower world-wide demand for coal and higher production efficiencies lead to lower EPC costs, however, this may be counterbalanced with expensive land/ rent in Thar, higher labor/ O&M costs and higher interest rates;(ii) ICB is a cumbersome procedure and an upfront tariff on take it or leave it basis remains the more viable option;(iii) there needs to be a fall back procedure for investors who are dissatisfied with either the upfront coal tariff or perhaps due to some technology specific reason; and (iv) the proposition for low cooling water requirements in the parched Thar area is being made compulsory.

Fatima Electric Company Limited has sent the following proposals ;(i) The prevalent upfront tariff should be extended for at least next two years or first 10,000 MWs;(ii) it would be more prudent strategy to openly invite interest of sponsors through extension of upfront tariff to get maximum projects so that first target of 10,000 MW is achieved;(iii) provision of cost plus may please be continued in parallel with upfront tariff and ;(iv) there should be a check on certain amount of water for power generation so that judicious use of water is ensured.

Sindh Engro Coal Mining Company, which is already setting up coal-fired power plants in Thar, has suggested that water is a scarce resource in Thar’s desert and as an option IPP developers may opt for air cooled or hybrid cooled solutions for their power plants. Therefore, the tariff should include the use of efficient water consumption technologies.

Sindh Engro Coal Mining Company has also submitted that in the event of the prevalent suspension imposed on imported fuels, a surge in interest from potential IPP developers to develop power plants based on Thar coal has been witnessed. SECMC further submitted that since mining is a scale business, Thar coal will become cheaper than the imported coal as the mine expands, therefore, it is essential that mining projects are expanded as early as possible.—MUSHTAQ GHUMMAN