Govt to take over K-Electric if utility refuses to sign PPA

The Economic Coordination Committee (ECC) here on Wednesday made the government intention clear of taking over K-Electric if the utility company continues to avoid signing power purchase agreement (PPA).

Regarding the power purchase agreement with K-Electric, the cabinet member said that after repeated failure of Power Division to sign agreement with the power utility, the ECC constituted a four member committee head by Finance Minister Shaukat Tarin comprising Minister for Planning and Special Initiatives Asad Umar, Minister or Industries and Production Hammad Azhar and SAPM on Power Tabish Gauhar to persuade K-Electric to sign PPA (Power Purchase Agreement) for enhanced electricity supply up to1,400 MW with the federal government. It was decided if the K-Electric continues to evade signing the PPA, then the government will not hesitate from taking over K-Electric control as a last resort.

The government is providing to K-Electric 1,000 MW of electricity (650 MW during Ramazan under the 2015 agreement and 350 MW more without any agreement). The K-Electric is getting free electricity and selling it to its consumers, without paying back to the federal government. The KE wants 1,400 MW per day, but has since long resisted to sign the agreements with NTDC and CPPA. The Power Division recommended to ECC to allow it to unhook the electricity to K.E from May 30, 2021 if the latter doesn’t sign the agreement. However, the ECC participants felt that in that case the people of Karachi will suffer and not the K-Electric. So the ECC decided to provide one last opportunity to the power utility and constituted a high power ministerial panel to persuade the K-Electric to sign the PPA and in case of failure, the government will not hesitate to taking over K. Electric control.

Earlier on 19th June, 2020, the Cabinet Committee on Energy (CCoE) approved additional supply of 1,300 MW from national grid to K-Electric. The CCoE on August 27, 2020 directed “KE and NTDC to start transmission of additional 350-450 MW for peak summer season from March 2021. It also decided that KE, CPPA and NTDC will sign Power Purchase Agreement for additional power supply of 350-450 MW within one-week but it could not happen.

The K-Electric desires additional capacity be increased to 1,400 MW. Power Division supports the proposal of KE. The KE is drawing an additional 350 MW from the national grid in addition to 650 MW to meet the emergent demand during Ramazan.

The K-Electric had agreed to be treated on the same principles as those applied to the 10 ex-WAPDA DISCOs. The KE also desires the payments to CPPA be adjusted against government’s subsidy but the Power Division opposes that. The K-Electric agrees to provide SBLC as a guarantee against payment while the Power Division is insisting on SBLC backed by an ESCROW arrangement, besides other technical matters all of which have prevented the maturing of the PPA.

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