Govt is Paying Rs. 150 Billion of Taxpayer Money Every Month to IPPs for Almost No Electricity

Consumers paid Rs. 150 billion per month in capacity charges during January-March 2024 to Independent Power Producers (IPPs), and many of these plants operate below 10 percent of their full capacity.

Former Commerce Minister Dr. Gohar Ejaz on July 20 shared data which showed how IPPs were easily ripping off citizens for making little to electricity during the first quarter of calendar year 2024.

“I’m sharing data from NEPRA for Jan 24 to March 24 showing a capacity payment of 150 billion PKR per month. Please note how this amount is distributed to various IPPs, with half running below 10% capacity. Four power plants are receiving 1000 crores per month each with #zero power supply.* This money, our halal income, is being given to 40 families under the guise of capacity charges,” he tweeted.

The former minister urged the federal government to re-classify IPPs in a way that payments are only made for power produced. He said, “These plants should be declared merchant plants, where payments are made only for electricity produced, and we should buy from the cheapest suppliers. The government should not do business at the expense of the people of Pakistan”.

NEPRA must include representation from all large consumers in its distribution and management. “This exploitation must end,” he added.

Here’s the full list of 106 IPPs and how they were paid in Q1 2024:

Solution: No Capacity Payment!!!

In a follow-up today, the ex-minister revealed that the government, due to “corrupt” IPP agreements, is purchasing electricity at exorbitant rates.

He said, “Government is buying because of these IPP agreements, the highest electricity units at Rs. 750 per unit from a power plant, while it is buying at an average of Rs. 200 per unit from coal power plants. Above Rs. 50 per unit from Wind and Solar. All below 20 percent of capacity and payment made to IPPs is Rs. 1.95 Trillion and [the] balance [of Rs.] 160 Billion is under verification. [The] government is making capacity payments of Rs. 140 billion to one plant at a 15 percent load factor, Rs. 120 billion to another plant at a 17 percent load factor, and Rs. 100 billion to a third plant at a 22 percent load factor. This totals Rs. 370 billion for just three plants, running at 15 percent load factor all year”.

He criticized the “capacity payment” term in contracts that allows for over-invoicing and results in substantial payments to IPPs without electricity production. He proposed eliminating capacity payments, advocating for payments only for electricity purchased from the cheapest suppliers.

Ejaz stressed that all IPPs should be treated as merchant plants, noting that 52 percent are government-owned and 28 percent are privately owned within Pakistan, meaning 80 percent are Pakistani-owned. He urged the public to rise against these exploitative agreements with 40 families. “Electricity being sold to us at Rs 60 per unit is only because of these corrupt contracts, mismanagement and incompetence. Please, all must rise against these agreements with 40 families to save your Country,” he added.