ISLAMABAD - The Inquiry Commission on Public Debt has started probe against Independent Power Producers (IPPs) for ‘profiteering’. It is alleged that they charged for the electricity over and above the Nepra approved rates.

The Commission has raised queries about their income, the procedures of setting up IPPs and supply of oil to the power plants, Khalid Mansoor, who is member of the executive committee of IPP Advisory Council, told the media yesterday.

He said that inquiry commission has summoned representative of the IPPs Advisory Council. He said they have submitted one year record the commission, which includes documents relating to their profits, proceedings of tariff, review petitions and their profit analysis.

The PTI government last month had constituted the Inquiry Commission, with Hussain Asghar as the chairperson, to probe the public debt accumulated during the 2008-2018 period.

The matter related to high profit of IPPs is also being investigated by National Accountability Bureau (NAB) and Nepra. The court, however, had granted a stay order against an inquiry initiated by the Nepra.

A Sub-Committee of Senate Standing Committee on Power had earlier this month said that an overpayment of Rs955 billion has been made to the IPPs during past six years which has increased the circular debt.

Senator Nauman Wazir Khattak, who chairs the sub committee, stated that about 75 percent of 187 Independent Power Producers are operational and if all of them are financially evaluated the assumption is that more than 2,000 billion is recoverable from them.

Khalid Mansoor rejected the perception that IPPs were charging three to four times more than allowed Nepra limit. He said that there was a serious lack of understanding in how accurate equity rates of return are calculated for investors in Power Projects, which leads to false accusations of excessive (windfall) profits.

He said that government would have to set ground rules to conduct efficiency audit of power plants. The government would have to compensate if heat rate is lower and IPPs will share dividends if the heat rate is



higher, he added.

About revision in power purchase agreements based on take and pay basis, he said that this would not be a good signal for the investors.

According to Khalid, the key reasons for the circular debt are excessive transmission and distribution losses, power theft, inefficient power generation by publicly owned GENCOS, and low recoveries from consumers by DISCOs.

He said that IPPs bear most of the consequences of circular debt and end up taking a significant hit on their returns due to time value of money as well as high interest cost on working capital. At present, IPPs overdue amount stands at Rs370 billion, he claimed.

High power tariff for consumers is mainly attributable to higher T&D losses and taxation in Pakistan. Only 60 percent of total cost of power actually relates to generation while 20 percent to high transmission and distribution losses and 20 percent relates to taxes.

The government requires transformation in power distribution companies by investing tens of billions of dollars to bring efficiency and improvement.

The representative of the IPPs said that government had taken capacity of IPPs on rent and these power plants could not sell electricity to other customers. There is a 75 percent cash flow of lenders in IPPs and there will be no investment if there is change in midway.

Khalid Mansoor said that they would present their case on all forums including senate committee on power. The IPPs would also approach the prime minister for the resolution of the issues, he added.

However, if nothing works and there is no solution, they have dispute resolution mechanism, he warned. “It is our constitutional right to move the international court within preview of resolution mechanism,” he said.

He said that IPPs had been contributing 60 percent electricity to the national grid and had played a key role in reviving the economy. The IPP model has been critical in attracting the necessary foreign and local investment required to alleviate the power crisis in Pakistan, he said.

The IPPs representative further said that in future as the country’s economy grows, more investment would be required to replace and upgrade inefficient publicly-owned power plants and add renewable / indigenous fuel based power projects to the grid.