Mid-term power tariff structure suggested

ISLAMABAD: The second meeting of the Committee on Rules and Procedures for determination of electricity tariff was held in the Ministry of Water & Power on Thursday under the chairmanship of Federal Minister for Water & Power to discuss various issues related to the electricity sector.

The Committee was constituted by the Prime Minister of Pakistan to resolve the long outstanding issues in the power sector. The various important issues were discussed and decisions were taken with the consensus of all the members. The Committee desired that tariff for the distribution companies will be set up for a period of 3-5 years in order to create stability in the tariff for the consumers and certainty in the cash flow of the power sector companies to attract private investment.

The Committee further agreed that a transparent and simple mechanism will be devised jointly by the Ministry of Water and Power, WAPDA, NEPRA and PPIB for the adjustment of increase in the input cost such as furnace oil, gas, diesel etc. Presently, the adjustment in the tariff is made on post-facto basis, which creates cash flow problems for the companies. The Minister emphasized that the mechanism should be simple and fair where in both the interest of consumers and the companies should be protected, and the revised mechanism should aim at minimum tariff increase for the consumers.

The first meeting of the committee was held under the chairmanship of the Minister for Water & Power in February 2005 wherein key issues relating to the tariff and investments in the private sector power projects were amicably resolved to carry out International Competitive Bidding for power projects by PPIB. These issues included long term Power Purchase Agreements, who would buy power from the private power projects, construction of transmission and inter-communication facilities and GOP’s guarantees for the performance of its different entities including the power purchaser and provinces. It was also agreed that the process for awarding the projects under the ICB would be structured and administered by PPIB. —Staff Report

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