CPPA-G Doubles Electricity Price for NTDC Due to High Fuel Costs and Losses

The Water & Power Development Authority’s power buying unit has doubled the price of electricity from Rs. 7.3 per unit to Rs. 15 per unit in recent monthly bills owing to higher fuel costs and losses.

The Central Power Purchasing Agency (Guarantee) Limited (CPPA-G) has charged NTDC at the average basket cost of Rs. 15.076/unit for excess loss against the average Rs. 7.368/unit determined by NEPRA on account of monthly FCA for FY 2020.

“NTDC has been charged month-wise for a total of 228,343.228 kWh excess units, whereas the CPPA-G own annual calculations reflect only an excess of 100,164.497 units,” National Transmission and Despatch Company has claimed in a letter written to NEPRA.

It is worth mentioning here that NEPRA had been directing the CPPA-G to finalize the agreement with NTDCL regarding losses being incurred over the Authority’s allowed limit without further delay.

In the new formation of the formerly known WAPDA, the CPPA buys electricity and NTDC distributes it among the distribution companies (DISCOs). DISCOs are responsible for the distribution of electricity at local levels.

The NTDC said that a formal agreement for the treatment of excess losses is yet to be executed between NTDC and CPPA-G. In the absence of such finalized agreement and mechanism thereof, the unilateral deduction on account of excess losses is not justified. NTDC disagrees with the submission of CPPA-G vide para 25.1 of the CPPA-G Market Operation Fee Determination that understanding on the issue is clear between CPPA-G and NTDCL.

Fuel cost payments (whether excess or not) of Generation licensees are the payment obligation of the power purchaser (i.e., CPPA-G), and NTDC has no contractual liability on its part to pay for the same. Moreover, these two entirely different financial transactions (i.e. NTDC Use of System Charges and T&T loss deduction) cannot be interchangeably adjusted against each other in absence of any agreement. Any such inappropriate adjustment is without merit.

It is important to refer to Para 25.2 of NEPRA’s determination for CPPA-G, which clearly states that the Authority is of view that impact of any losses incurred by NTDC over and above the Authority’s allowed target of T&T losses cannot be passed on to the consumers. The burden of the same has to be borne by NTDC. In the light of the above, NTDC is only responsible for the kWh loss in its 500 and 220kV network exclusively. Nevertheless, the CPPA-G working doesn’t reflect this understanding, and NTDC has been burdened with disallowed costs (not related to the 500 & 220kV network)

NTDC also contests the assumptions in units allowed values undertaken by CPPA-G from the NEPRA FCA decisions and highlights the need for reconciliation between CPPA-G and NTDC on the matter. In NTDC’s view, the CPPA-G month-wise calculations for excess losses violate this principle.

It is pertinent to highlight the example of CPPA-G calculations for FY2020, wherein NTDC has been charged month-wise for a total of 228,343.228 kWh excess units, whereas CPPA-G’s annual calculations reflect only an excess of 100,164.497 kWh units. As a result, NTDC has been charged for more than twice the excess loss units in FY 2020 due to this distorted calculation.

As per the CPPA-G working for excess loss calculation, the average basket cost of PPP per excess unit for FY 2020 comes out to be Rs. 15.076/kWh. Whereas the average PPP cost per unit has never exceeded Rs. 7.368/kWh in the NEPRA FCA decisions for corresponding months of FY 2020.

This calculation of CPPA-G is incomprehensible, and it is unjustified to charge the PPP rate of RFO/HSD for losses at 500 & 220kV level when a major portion of cheaper Hydel and Natural Gas generation is connected with NTDC 500 & 220kV network.

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