Govt moves to cancel agreement with one more IPP

In a bid to reduce electricity prices and save billions, the Government of Pakistan has decided to part ways with another Independent Power Producers (IPPs), ARY News reported.

According to reports, the government of Pakistan is set to terminate its agreement with Pak Gen Power Plant, a private electricity generator with a 365 MW capacity.

The plant, established under the 1994 power policy, is one of several IPPs under review.

The federal government is currently reassessing its contracts with various IPPs. In October, the Federal Cabinet terminated agreements with five IPPs, and this month it also reviewed agreements with eight power plants running on bagasse.

A similar development happened on 13 December, when the federal government of Pakistan decided to terminate agreements with six more Independent Power Producers (IPPs) to reduce electricity prices.

Aiming to provide relief to consumers burdened by high electricity costs, the government had decided to end expensive contracts with six more IPPs having a total capacity of 2,396 Megawatt, government sources said.

This measure is expected to save at least Rs300 billion in the national exchequer of Pakistan.

The six IPPs include Gul Ahmed Energy with 136 megawatt capacity, Kapco Power Project 1638 MW, Liberty Power 200 MW, Attock Power 135 MW, Koh e Noor Energy 131 MW, and Tapal Energy 126 MW.

The termination of the contracts with more IPPs will lead to a significant reduction in electricity tariffs, as per sources.

The federal cabinet had previously approved the cancellation of contracts with 13 IPPs including 8 bagasse-based private power plants.

What is a Capacity Payment?

Capacity payment refers to the payment made monthly by consumers to the power-producing company to maintain its capacity to generate electricity, ensuring that additional demand can be met.

Notably, these capacity payments to IPPs are made in US dollars, not Pakistani rupees.

Former caretaker commerce minister Gohar Ejaz has been raising awareness through his statements and social media posts about the government’s mistakes and how these mistakes, if not corrected, will deteriorate the country’s economic conditions further.

In one of his posts, Dr. Gohar Ejaz detailed the performance of the five most expensive power plants in Pakistan.

Dr. Gohar Ejaz revealed that without producing any electricity, the Rousch Power Plant was paid Rs1.28 billion from January to March 2024.

Similarly, the China Power Hub received Rs33 billion without producing electricity during the same period. Port Qasim Electric was also paid approximately 30 billion PKR without production.

Moreover, from January to March, Punjab Thermal Power was paid around 10 billion PKR, and Jamshoro Power (GENCO I) was paid approximately 930 million PKR without generating any electricity.