K-Electric : ECC to finalise long-lasting disputes with K- Electric over tariffs, supply and payments

The Economic Coordination Committee (ECC) finally approved four agreements with K-Electric (KE) awaited settlement for almost five years.

The GoP and K-Electric had almost 500bn rupees of transactional disputes in relation to cost of electricity, tariff subsidy, interest payments and late payment charges.

The agreements with K- Electric 

K-Electric is the country’s only private power supply company. Which have various administrative, financial, tariffs and distribution subjects required settlement with the government of Pakistan and its entities (SOE).

Power Purchase Agency Agreement (PPAA)

In (PPAA) agreement, the federal government to provide 1,000 megawatts of electricity to KE for ten years, and another 1,000 MW would be provided subject to availability.

KE has also submitted a plan for the generation of over 3,000 MW of electricity. The plan envisages the addition of cumulative base load capacity of 3000 MW as future capacity addition to be undertaken in the next 10 years in IPP mode.

KE thinks thatpredicts its requirements can be met with an addition of 1,500 MW. The company is also in the process of investing in the 660MW unit -1 of the Jamshoro Power plant.

Interconnection Agreement (ICA)

Under (ICA) agreement, KE is responsible for investing in interconnection facilities to ensure seamless power off-take from the national grid under its seven-year investment plan already submitted to the power regulator, both in terms of 1,100mw and additional Jamshoro plant-related.

Tariff Differential Subsidy (TDS) Agreement
The government would ensure proper budgeting and timely payment of tariff differential subsidy, including late payment surcharge, for uniformity of national rates.

Quarterly and monthly tariff adjustments have already been synchronised with federal distribution companies to avoid the addition of circular debt, which now stands above Rs2.6 trillion. AGPR would ensure a timely audit of TDS and late payment surcharge.

TDS consists mainly of the subsidy that the federal government promises to pay in order to ensure that the tariff paid by K-Electric customers is no different from the electricity rate prevailing in the rest of the country.

In the future, if the government delays subsidy payments, the company can make adjustments after two months against its payments to the government on account of power purchases.

Similarly, on late payment, the company would also be entitled to late payment surcharges – equalising its status with the government on this count.

On December 13, the ECC discussed the draft agreements in detail and asked Power Division to provide further information and detailed working to clarify the observations raised by ECC.

The matter will be discussed again in the next meeting once the additional information is provided.

The Federal Minister for Finance, Revenue, and Economic Affairs, Dr. Shamshad Akhtar presided the meeting. Which was attended by the Minister of Planning, Development and Special Initiatives Mr. Sami Saeed, the Minister for Privatization Mr. Fawad Hasan Fawad, Minister for Power & Petroleum Mr. Muhammad Ali, Advisor to PM on Finance Dr. Waqar Masood, Federal Secretaries, and other senior government officials of the relevant ministries.