Nandipur power plant: Regulator rejects revised cost, sets higher efficiency levels

ISLAMABAD: The federal government has found itself in trouble in its bid to run the Nandipur power plant as the National Electric Power Regulatory Authority (Nepra) refused to accept a huge portion of the project’s revised cost, making it unfeasible to operate the plant.

Nepra’s observation came in response to a petition filed by the project operator seeking reconsideration of the power tariff for a smooth functioning of the plant, officials say.

The cost of 445-megawatt Nandipur power plant cited in the tariff petition was based on the revised PC-1 (project cycle) approved by the Executive Committee of the National Economic Council (Ecnec) in July 2013.

In April 2015, the regulator had approved a cost of Rs42 billion for the power plant and set the tariff at Rs11.63 per unit.

Water and Power Minister Khawaja Muhammad Asif told a parliamentary panel in December last year that the project cost had surged to Rs58 billion from an estimate of Rs22 billion in 2007 due to delay in work. Later, the cost was revised further upwards to Rs65 billion.

While determining efficiency levels for the plant, Nepra has set the ratio at 45% on consumption of residual fuel oil (RFO) as fuel and 49% on consumption of gas. However, the Nandipur Power Generation Company has put the efficiency at 44% and 48% respectively.

The efficiency of the power plant is affected by various factors including weather conditions, attitude of officials, plant site and configuration.

Another crucial factor was the recommended efficiency of the engineering, procurement and construction (EPC) contractor which was 44.3%. The company has asked for setting the efficiency level at 44%, terming it quite realistic.

The officials point out that the setting of efficiency benchmarks at higher levels leaves a huge impact on the fuel cost, adding the cost of a project is passed on to the consumers and if the benchmarks are on the higher side, plant operations will suffer a loss.

“At such efficiency levels, the project will become unviable,” an official said, adding if the plant could not run due to lower payment of fuel cost, a large investment made on its installation and other costs would go to waste.

Nepra did not set the tariff on the basis of open cycle after the date of commercial operation.

However, according to the official, in such a situation the entire plant would have to be shut down if its steam turbines are switched off for annual maintenance or due to some fault.

“The running of the plant on open cycle is essential keeping in view the electricity shortage and demand in the country,” the official added.

Nepra also did not fix the tariff on the consumption of high-speed diesel as a fuel. However, the official said, the running of the plant on diesel may be required in emergencies, therefore, the tariff was needed.

The regulator did not permit the recovery of fuel cost before the date of commercial operation and as a result Rs4.5 billion could not be recovered.

The Central Power Purchasing Agency had submitted the petition for tariff adjustment on this account but it was disallowed.

The official warned that power producers and distributors were already facing a crippling circular debt and the determination of an unrealistic tariff for the Nandipur power plant would only add to the debt pile.

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