NTDC, CPPA-G chargesheeted for causing billions of rupees loss to consumers

ISLAMABAD: National Electric Power Regulatory Authority (Nepra) has reportedly charge sheeted NTDC and CPPA-G for inflicting billions of rupees financial loss to electricity consumers and national exchequer by violating merit order and plant under-utilization, well informed sources told Business Recorder.

This was revealed in an analysis conducted by the regulator of generation of power plants on the basis of data provided by National Power Control Centre (NPCC) in its daily log report as well as information provided by Central Power Purchasing Agency Guarantee Limited (CPP A-G) through its monthly energy procurement report.

The analysis reveals under-utilization of various power plants, prima-facie, operation of power plants by deviating the Economic Merit Order (EMO) and burning of gas in less efficient power plants despite non-utilization of efficient power plants etc. It is pertinent to mention here that, under- utilization of ‘take or pay’ and/or ‘Must Run’ power plants and operation of power plants by not following the EMO has significant financial implications for the power sector and economy at large and adds to the burden on the end consumer.

According to the analysis, the first reason of power plant non-utilization or under-utilization is stated as less demand against the installed capacity; non-utilization or underutilization of available ‘Take or Pay’ and ‘Must Run’ power plants, for whatever reason, create extra financial burden for the end consumer and the exchequer. The per unit capacity and energy charges (Rs/kWh) of available ‘Take or Pay’ and ‘Must Run’ power plants is inversely proportional to their plant utilization factor: the higher the utilization factor of power plants lower the per unit (Rs/kWh) capacity and energy charges.

The underutilization of ‘Take or Pay’ and/or ‘Must Run’ power plants due to lack of demand indicates flaws in planning for induction of generation capacity resulting in undesirable liability.

Nepra is of the view that a study may be carried out to ascertain the situation of electricity demand as compared to available capacity at least during last 5 years (2014-2019) for analysis and foundation for future planning.

The second main reason for efficient power plant under-utilization was of non availability of fuel (RFO/gas/RLNG/coal etc.). The fuel availability is generally the power producer’s responsibility by entering into Fuel Supply Agreements (FPA). However, in case of some gas-based power plant the fuel risk is with power purchaser i.e. in case of non-availability of gas, the power plant will be eligible for capacity payment without supplying electricity to the power purchaser. Four gas based power plants (Orient, Saif, Sapphire and Halmore) were inducted on pipe line quality gas between 2010 to 2011.

In these cases, the risk of gas supply is passed on to the power purchaser and ultimately to the electricity consumers.

The regulator maintained that in recent past, three RLNG power plants namely at Haveli Bahdaur Shah, Bhikki & Balloki were inducted in the system while the fourth is under commission. These are ‘Must Run’ power plants up to 66% of their installed capacity. As per the information provided by National Power Parks Management (Private) Limited, in case of failure of SNGPL to supply RLNG to the power producer after receiving RLNG from SSGC in SNGPL’s system, the SNGPL is liable to reimburse the capacity payment paid to the Power Producer by CPPA-G for the period of such non-supply. Since each of these power plants are above 1000 MW capacity, therefore, their under-utilization causes higher amount on account of partial load adjustment charges as well as capacity payment charges.

The regulator further stated that underutilization of plants even caused by non-availability of fuel ultimately impacts on the electricity tariff of end consumer as in case of non-availability of fuel for efficient plants, they are replaced by less efficient power plants and in such cases end-consumer tariff will increase firstly for the reason that electricity was supplied through less efficient power plants and secondly for paying the capacity charges for un-utilized/idle capacity.

“It is a fact that most of the gas, (including RLNG) based power plants in the power sector of Pakistan are most efficient power plants and falls under top slots of Economic Merit Order (EMO),” the regulator maintained.

In the wake of depletion of local gas, the country started importing RLNG for power generation in 2016. Whereas not only the new RLNG based power plants have been commissioned but also some of the existing gas based power plants of IPPs /Gencos /K-Electric have been granted tariff on RLNG as well. As such the RLNG is imported fuel and its availability can be ensured through better supply chain management.

Nepra has also noted that gas allocation and its supply to the power plants by gas companies is not well coordinated between the gas supply companies and the NPCC. Prima facie, it is noticed that at various occasions gas was being supplied to less efficient power plants while efficient gas based power plants were under-utilized or un-utilized due to non-supply of gas. It is also a fact that price of pipeline quality gas is lower than RLNG gas and at several times, the pipeline quality gas is supplied to lower efficiency power plants. This fact also needs to be looked into.

Nepra has also observed that similar is the case of coal-based power plant. The recently inducted coal based power plants also fall under top slots of EMO and therefore are required to be operated on full load. Under-utilization of these plants results in lowering their efficiencies as their efficiencies are adjusted to their Part Load Operation. Principally, consumer cannot be punished for non-availability of fuel which is controllable factor.

As per submitted report by NTDC, another main cause of underutilization of efficient power plants is transmission system constraints existing in NTDC’s transmission network, such as overloading of transmission lines, insufficient transformation capacity, outages of transmission lines due to tripping, faulty transformers etc. Under Applicable Documents, Transmission company is liable to evacuate the power from power plant which is supplying electricity in NTDC system. Non evacuation of electricity that can be generated through cheaper power plants is a failure of transmission company and that needs to be looked into. It is relevant to mention that transmission system of Pakistan (i.e NTDC transmission system) is a ring main system and principally it should have been designed and developed to transport the electricity from one site in South to any other site in Center or North and vice versa.

Another reason for underutilization of power plants is scheduled and maintenance outages allowed to Power Plants in PPA. Forced and schedule outages are allowed to all power plants and CPPA-G imposes LDs on the power plants, if the outages exceed the allowable limits, as given in the tariff determinations and the PPA. As per submitted report, during the FYs 2015-16 & 2016-17, CPPA-G imposed penalty of Rs 4.68 billion to GENCO I, II & Ill on account of non-availability of GENCO’s power plants as per PPA provisions. However, it is not confirmed that these LD’s were paid by GENCOs or not and if paid then how was it adjusted in the accounts.

Various wind power plants through their letters addressed to Nepra raised concerns with regard to instability of grid and non-evacuation of full power from wind power plants.

Data had also been sought from CPPA-G in respect of payments to wind power plants on account of Non-Project Missed Volume (NPMV) which is mainly caused by grid system constraints of power system due to which all generated electricity is not delivered by the Complex owing to solely a Non-Project Event. CPPA-G has verified Rs 7.651 billion during the FY 2016-19 on account of NPMV claims submitted by various wind and solar projects.

The regulator, in its report opined that timely construction of interconnection facilities and the transmission system to evacuate power from power plants is the primary responsibility of Transmission Company i.e. NTDC. However, It appears, prima-facie, that NTDC has faltered in its responsibility to construct/augment the transmission facilities which include the interconnection facilities, transmission lines, grid stations etc., in timely manner which has caused under or non-utilization of available capacity and payment of capacity charges for un-served electricity.

Delay in completion of interconnection schemes and the required transmission facilities, prima-facie, has caused immense financial loss and ultimately the higher tariff to electricity consumers.

Information in respect of late payment charges paid by power purchaser to four IPPs (Saif, Sapphire, Orient and Halmore) for the period 2011 to 201 8 was sought. As per the information provided by the IPPs, over Rs 4 billion was paid by power purchaser to those IPPs against their claimed amount of Rs 8.7 billion on account of late payment charges. Again this expenditure is an extra burden on the electricity consumers and/or on the national exchequer caused by inefficiency of CPPA-G and needs to be looked into. Nepra is of the view that it needs to be determined whether power plant in NTDC’s system has performed as per EMO and dispatch parameters provided in the Grid Code or not. Any variation from such dispatch parameters again creates extra burden on the tariff of end consumer.

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