NAB Urged to Probe Power Companies for Milking Rs. 2,000 Billion from Public

Transparency International Pakistan (TIP) has approached National Accountability Bureau (NAB) to take notice of allegations of misuse of power by NEPRA and Ministry of Water & Power in Coal Power, Gas Power and Solar Power Projects in last 10 years by giving illegal favors to IPPs through unjustifiable tariff revisions.

TIP said that through such tariffs revisions that are illegally approved by NEPRA, IPPs made over Rs. 2,000 billion or USD 19.23 Billion from general public.

A letter from TIP to NAB Karachi, a copy of which is available with ProPakistani, states that Transparency International Pakistan has noted from the newspaper about the the allegations of corruption in the process of determining the tariff by NEPRA and Ministry of Water and Power in Coal Power, Gas Power and Solar Power Projects during past 10 years.

TIP, in the letter, said that this illegal determining of tariffs have costed the commin men a loss of Rs. 200 billion per year, as a result owners of IPPs made an illegal revenue in the tune of Rs. 2,000 billion during last ten years.

Coal Power Plants

Transparency International noted that Government of Pakistan paid a Circular Debt of Rs 460 billion in June 2013, according to which Hubco, (1,292 MW) Lalpir, (362 MW) Pakgen, (365 MW) Saba (134 MW) power plants were bound to convert their plants from furnace oil to coal within 24 months.

On the other hands, on 30 June 2013, NEPRA announced upfront tariff for Coal Power Plants. While in order to facilitate these power companies, MoW&P requested NEPRA to jack up Tariff of Coal Power Plants by 20%.

Not to be mentioned, Hubco, Lalpir, Pakgen had agreed to set up Coal Power Plants based on 2013 Tariffs and that the plants were to be converted in 24 months, i.e. by June 2015.

TI Pakistan says that it sent objections to NEPRA in May 2014 for illegal act committed by MoW & Power, requesting NEPRA not to consider the enhancement which is against the public interest.

NEPRA, however, ignored TI Pakistan request and issued revised Tariff on 26.6.2014, which increased the benefits to IPPs by tariff increase of Rs 1.5 per watt, as well as guaranteed TAX free profit of 27% for 30 years, and capital cost increase of 35% to 40 %.

Interestingly only 3 NEPRA Members decided the revision, whereas a total of 5 members are requireded to be present to take decision on Tariff.

TIP said that Ministry of Water and Power Secretary Saifullah Chatha himself pleaded the case with the NEPRA during a public hearing of the authority, which is against the provisions of NEPRA Act, Rule and regulations.

According to TIP, Lalpir, Pakgen and K Eletctric’s old RFO power plants had outlived their commercial lives, and were almost closed. But on pretext of fuel shortage were illegally getting capacity payments needed by the IPPs.

TIP further said in the letter to NAB that Government of Pakistan and NEPRA extended illegal favor by singing an MoU with the plants and and allowed them to set up plant again in 24 months, for which they were allowed 36 months construction period.

Though 17% ROE is allowed on these plants, and tariff allowed is 7.162 Cents/KWH, which is more than tariff of RFO Plants as well as GAS plants, and no additional power will be added into the national grid.

TIP said that NEPRA’s cost revision for Lalpir and approval of high-cost Wind, Solar and RFO power generation would cost common Pakistanis an additional Rs. 50 billion per year or Rs. 1500 billion in 30 years.

Solar Power Plants

TI Pakistan said that it has already notified NAB on one of few frauds committed by NEPRA on Solar Power Plants, for example NEPRA illegally revised tariffs by 32% to 37% of Solar Power Plants.

TIP said that this revision in tariffs were outcome of some NEPRA and few Govt. of Pakistan officers along with Blue Star Hydel, Buksh Solar and Safe Solar.

NEPRA said that this revision would give the IPP owners an additional benefit of over Rs 100 billion at cost of general public.

TIP said that NEPRA allowing tariff of 15-17 cents watt in Quaid Azam Sloar Park should also be investigated.

TIP also noted that recently awarded Solar Power Project with the name of “Emirate of Dubai Project” has set a new world record for the cost of solar power.

TIP said that Solar Power Plant Tariff approved by NEPRA are 50% higher than market, and on 1,000 MW in 20 years IPPS will make extra profit of Rs 500 billion.

Wind Power Plants

TIP said that procurement of Energy Equipment (wind turbines) are costing around $105-$111 million per turbine, however, in actuality this cost should be around $75 million. TIP explaining this cost as following:

• Individual turbines cost: $47-$50 million
• Civil costs: $8-$9 million
• Electrical substation and transmission lines inside the site: $8 million
• Risks coverage: $7-$8 million
• Total Cost: Around $75 Million
• Official Cost charged: $105-$111 million

TIP said that on 600 MW Wind power plants additional benefit of Rs 50 Billion/annum has been given to IPPs by NEPRA and AEDB.

Gas Fired Power Plants

Chairman NAB was informed by TIP on 24 May 2016 that NEPRA has also allowed 80% to 100% capital cost in Gas Fired Power Plant in 2015.

In the RLNG-based projects which involved engineering, procurement and construction cost (EPC) of $791,000 per megawatt for private sector projects, the Government of Pakistan under the supervision of Shehbaz Sharif, CM Punjab decided to hold competitive resulting in finalization of EPC contracts on less than $475,000 per MW for projects at Guddu, Bhikki and Havelli Bahadur Shah for 1,200 MW each.

Net saving declared by the Prime Minister in capital cost to GoP is over Rs.105 Billion, and in 30 years, lower traffic will benefit consumers Rs 500 billion.

On the other hands, NEPRA in previous IPPs approved US $ 750,000 to 2 to 3 Gas Powered IPPs, which must be investigated.

TIP said that on 1000 MW of such plants, extra profit allowed to IPPS by NEPRA runs into over Rs 30 Billion/annum.