Daily Times

KARACHI: In order to provide security to 19 China-Pakistan Economic Corridor (CPEC) power projects, Pakistani electricity consumers will have to pay about Rs 505 million ($4.8 million) per annum through monthly bills for entire 25-30 years life of the projects.

The National Electric Power Regulatory Authority (Nepra) Thursday has allowed CPEC’s projects to induct 1% capital cost reduced by $150,000/annum in power tariffs.

The power regulator has decided to allow 1% capital cost of the project reduced by $

150,000/annum which is subject to 3% indexation for each year after the 1st year from Commercial Operation Date (COD) as security cost in respect of each CPEC power project.

The article 10 of the CPEC agreement suggest that the Pakistani party shall take the necessary measures to ensure the safety of Chinese personnel and projects, so, the government of Pakistan has decided to establish a special security force/division of armed forces to ensure security of the CPEC projects. In this regard, the government directed the Nepra to allow 1% increase in capital cost of all upcoming power projects.

However, Nepra having serious reservations over the government’s decision initiated a suo-moto review proceedings and the hearing in this regard was held on 4th April 2017 wherein representatives of power companies, Independent Power Producers (IPPs), media and general public were present.

Most of stakeholders particularly the CPEC IPPs objected that the provision of security is the responsibility of the state and should not be charged to the electricity consumers.

All the IPPs have agreed that in case of extra security requirement, all reasonable out of pocket expenses shall be borne by the IPPs subject of maximum of $150,000/annum. Some of the stakeholders raised the issue that the extra security arrangement for CPEC projects only is discrimination to other non CPEC projects.

According to the approved payment mechanism by Nepra, IPPs of CPEC projects shall include in the monthly capacity invoice a separate charge on account of security cost. The capacity charge for security cost shall be calculated on the basis of determined annual security cost of the respective project, reduced by $150,000/annum for the 1st year from COD and thereafter @3% indexation for each succeeding year, divided by net annual output in kilowatt hours assuming reference exchange rate of Pak Rupees105/US Dollar.

“In case the annual security cost of a project is less than $150,000/ subject to applicable indexation, IPPs shall not include security cost in the capacity charge invoice and CPPA shall not pay any amount on account of security cost for the respective project”, added Nepra.

The Nepra said that if the overall security situation improves in future, and government of Pakistan considers that special security arrangement are no longer needed and the special security force/division is released from this responsibility, no payment shall be made by the power purchaser on account of special security arrangement.

Published in Daily Times, August 4^th 2017.