ISLAMABAD: The government is likely to renew 650MW supply contract with the K-Electric with some new conditions as the Ministry of Water and Power has cautioned the distribution company to act in accordance with the privatization agreement.
It is to be noted that the current agreement is going to expire on Jan 26.
According to reports, the government is likely to renew the power supply agreement with the K-Electric with the reminder to the company that it was a private concern and had to act accordingly.
It has been learnt that period for the new contract is being determined.
Conditions likely to accompany the renewal involve mode of payments (with additional guarantees to make them regular), exhaustion of its own generation before approaching the national grid for help and delinking energy payments with other official bills.
The payment for 650MW has been a constant problem with K-Electric. The reports point out that the K-Electric conveniently links its payments to the recovery from the Sindh government, the Karachi Water and Sewerage Board and federal bodies and tariff differential subsidy from the federal government and stops energy payments to the National Transmission and Dispatch Company.
Its current default, documented in November last year, stands at Rs32 billion. The new agreement would bind K-Electric to either clear those payments up front, or, at least come up with a credible methodology to do so within a minimum possible time.
Apart from the payments, the original agreement — conditions on which K-Electric was privatised – stipulated the company can get “up to 650MW” from the national grid, implying thereby that it has exhausted its own generation first. The agreement also binds it to enhance its generation capacity within shortest possible time. K-Electric has done neither. It has rather shifted the entire burden on the national grid, at times drawing up to 800MW — and does not pay for it on lame excuses.
The new agreement would ensure that K-electric first utilise all generation resources — captive, rental, IPPs and its own — and also register fluctuations in demand before asking power from the national grid, say people involved in the process of rewriting the contract.
However, the K-Electric management claimed that it had been following the PPA and privatisation deed in letter and spirit. It pointed out that if the PPA linked tariff differential subsidies with payments to the sector, what was wrong with the company asking for it before making other payments? The company claimed that it still owed over Rs100 billion in dues to different department of the federal and provincial governments against the payables of Rs50 billion.
