Supply of 1,400 MW: the government finalizes the new PPAA, ICA with KE

ISLAMABAD: the electricity division would have finalized a new electricity purchasing agency contract (PPAA) and an interconnection agreement (ICA) with Karachi Electric (KE) for the supply of 1,400 MW of electricity to the latter, but disagreement persists over base load versus firm capacity and Late payment supplement for regulatory delays between the two parties, knowledgeable sources said. Business recorder.

Sharing the details, sources said that a Power Purchase Agreement (PPA) was signed with KESC (now K-Electric) by NTDC on January 26, 2010 for the purchase of power sales up to 50 MW. The agreement was in effect for 5 years until January 25, 2015.

The Sindh High Court, in Case No. 205, barred the government and NTDC from intervening in the operation of the power purchase agreement and ordered the NTDC to continue providing electricity. electricity at KESC on February 6, 2014.

The Cabinet Committee on Energy (CCoE), in its decisions of June 19, 2020 and August 27, 2020, approved the supply of additional electricity to K-Electric from National Grid in addition to the existing supply of 650 MW.

Power Division finalizes new PPA project with KE as well as disputes

In accordance with the instructions of the CCoE, several meetings were held between the Finance Division, the Electricity Division, CPPA-G, NTDCL and K-Electric to finalize the PPAA, ICA and TDS agreements for the supply of electricity from the grid. national to K-Electric, including supplies of 650 MW.

The final draft PPAA, ICA and TDS agreements, duly initialed by the parties, are also attached to the Power Division summary.

According to sources, K-Electric agreed to provide a stand-by letter of credit (SBLC) backed by main collection accounts as collateral for payment to CPPA-G under the PPA, the draft of which would also be shared with the CCoE. .

Despite substantial consensus on the drafts of the three agreements, a few areas have not been agreed with KE. These include the issue of base load versus firm capacity in 1CA and the late payment surcharge due to regulatory delays in the TDS agreement.

On the issue of base load versus firm capacity, NTDC argued that K-Electric should be treated the same as the rest of the country on a pro rata basis according to the 2005 Grid Code, and if there is a shortfall of power available in the NTDC system, for reasons of force majeure or other reasons, K-Electric will have to share the same on a pro rata basis with other distribution companies.

However, KE wants the power supplied to it to be made available on a “basic” / unwavering basis and that the power reduction only be done in cases of force majeure.

New subsidy mechanism: Power division seeks approval from Nepra

Another issue that remains unresolved between the electrical division and Karachi Electric is the late payment surcharge (LPS) for regulatory delays.

KE argues that tariff determinations, monthly or quarterly tariff adjustments must be made in a timely manner in accordance with statutory deadlines (as defined in the Nepra Law and Rules and Regulations) and in the event of delay beyond these statutory deadlines. , a compensation mechanism for the cost of these delays in K-Electric’s respective tariffs be authorized by the regulator.

Power Division, which is to pay the amount of the tariff differential subsidy, through its entity CPPA-G, the market operator, did not support the proposal.

The Power Division requested the CCoE to approve the annexed draft PPA, ICA and TDS agreement covering the existing supply (650 MW) and the additional supply of 1400 MW after going through the versions of the Power Division / NTDC .

The sources argued that the decision on both issues will be made by the ECC and subsequently by the Federal Cabinet.

Copyright Business Recorder, 2021

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