Senate Committee for “Renegotiating IPP Contacts”

September 6, 2023

The Senate’s Standing Committee on Power convened on Tuesday and called for a comprehensive review of agreements with Independent Power Producers (IPPs). They proposed measures to shield those consuming up to 200 units of electricity per month from tariff increases, while also advocating for a unified Tariff structure.

The committee expressed frustration with the Power Division’s convoluted policies regarding relief for domestic power consumers and urged the formulation of policies to protect vulnerable segments of society from daily tariff hikes. Additionally, the committee criticized distribution companies for their inaction in combating power theft.

The meeting was convened to address the recent surge in electricity rates, which has led to civil unrest and discontent among the general population. During the session, the committee received a detailed briefing from the Power Division.

Senator Saifullah Abro emphasized that resolving the nation’s energy crisis necessitates a comprehensive review of IPP agreements, within the boundaries of the law, to reevaluate pricing and enhance oversight to prevent over-invoicing. He also stressed the importance of scrutinizing the energy infrastructure for clauses related to misinformation and fraud.

The committee expressed concerns about the payment criteria for IPPs, demanding transparency and criticizing the absence of a 10-year payment breakdown. They also chastised the Central Power Purchasing Agency (CPPA) for lacking detailed financial knowledge. The committee stressed the importance of appointing qualified individuals within the Power Division to address the public’s relief needs.

It was noted that there are a total of 104 IPPs, and 34 out of 46 IPPs have signed the IPP relief agreement, where tariff rates are being revised.

Senator Bahramand Khan Tangi raised concerns about corruption among employees of power distribution companies who are allegedly facilitating power theft without being held accountable. Officials from the Power Division mentioned ongoing negotiations with the International Monetary Fund (IMF) and the need to adhere to the IMF-agreed framework.

In response, Tangi inquired whether the IMF had prevented them from taking action against power theft and default.

The committee sought details on the breakdown of the installed capacity of 44,943 MW but received no definitive answer from the Power Division. It was explained that the current infrastructure could support a total consumption of 26,000 MWs. The committee revealed that a total subsidy of Rs976 billion had been allocated for the power sector. This allocation included Rs158 billion for distribution companies, Rs169 billion for Karachi Electric (KE), and Rs82 billion earmarked for interest-related expenses of the Power Holding Company. An additional subsidy of Rs126 billion was specifically designated for KE.