Ali explained that a study on IPPs was conducted in 2019 in response to the rising electricity costs, with the final report being released in 2020
By our correspondent
ISLAMABAD: The Senate Standing Committee on Power convened on Tuesday, where significant concerns were raised regarding the Independent Power Producers (IPPs) sector, specifically highlighting negligence and major shortcomings in tariff assessments and the operational efficiency of the IPPs. The meeting, chaired by Senator Mohsin Aziz, focused on the lack of crucial studies and evaluations, particularly the absence of technology assessments and tests that should have been conducted to determine the effectiveness and efficiency of the IPPs.
Special Assistant to the Prime Minister on Power and Vice Chairman of the Prime Minister’s Task Force on Energy, Muhammad Ali, briefed the committee about these issues and the government’s initiatives moving forward. Senator Aziz pointed out that essential details, including the rate of return, heat rate, and audits related to IPPs, had not been provided to the committee. He emphasized that, despite the termination of contracts with five IPPs, the committee sought clarity on the future of the remaining ones.
Ali explained that a study on IPPs was conducted in 2019 in response to the rising electricity costs, with the final report being released in 2020. According to the study, when factoring in returns on investments, IPP profits were found to exceed 27 percent, which raised concerns over the high cost of electricity. Despite this, Ali noted that, due to budget constraints, no thorough evaluation of the technologies used by the IPPs had been conducted. Furthermore, vital tests such as heat rate and efficiency audits were not performed. This lack of assessments led to Nepra (National Electric Power Regulatory Authority) approving tariffs without verifying the operational efficiency of the plants.
Ali also disclosed that when Nepra attempted to audit the heat rates and efficiency of IPPs, many of the companies managed to secure stay orders from the courts, preventing further investigation.
Looking ahead, Ali revealed that all IPPs would eventually transition to a “take or pay” model, where they would be guaranteed a payment regardless of electricity demand. He noted that negotiations with the IPPs regarding this shift were still ongoing and were expected to take at least another three months to finalize.
This meeting underscores the ongoing challenges within Pakistan’s energy sector, particularly the need for greater transparency and accountability in the operations of IPPs to ensure fair pricing and efficient energy production. The committee’s continued scrutiny of IPPs’ operations suggests a critical review of their contracts and an effort to reduce the burden of excessive electricity costs on consumers.
