However, in future, if the overall security situation improves and GoP considers that special security arrangements are no longer needed and the special security force/division is released from this responsibility, no payment will be made by the power purchaser on account of special security arrangement.
On September 23, 2016, the Economic Co-ordination Committee (ECC) of the Cabinet had approved 1 percent capital cost of the project as security cost for each CPEC power project. Subsequently, the Ministry of Water and Power had submitted a petition for "induction of security cost for the CPEC projects in the power tariff" through Nepra to ensure the security sustainability. In response to the notice of suo motu proceedings in the matter, written comments were received from Zonergy, Hydro Dawood, UEP Wind, SK Hydro, Syed Akhtar Ali and Anwar Kamal Law Associates. The authority heard the viewpoints of all stakeholders.
After months of hearing, Nepra, in its determination has stated that it has approved payment mechanism as under: IPPs of CPEC projects will pay $ 150,000/annum, subject to 3 percent indexation for each year after the 1st year from COD, as required under security protection clause of the Implementation Agreement directly to the relevant Ministry/Agency designated for the purpose during the construction period as well as during the operation period.
During the operation period, IPPs of CPEC projects will include in the monthly capacity invoice a separate charge on account of security cost. The capacity charge for security cost will be calculated on the basis of determined annual security cost of the respective project, reduced by $ 150,000/annum for the 1st year from COD and thereafter @3 percent indexation for each succeeding year, divided by net annual output in kilowatt hours assuming reference exchange rate of Rs 105/$.
The security cost component of capacity charge will be indexed on the basis of exchange rate of the last available day of the preceding quarter. The IPPs will seek its approval from Nepra quarterly in accordance with other tariff components of the capacity charge. IPPs will pay the invoiced amount immediately to the relevant ministry/agency designated for the purpose.
The CPPA will pay the invoiced amount in accordance with the other components of capacity charge in case the annual security cost of a project is less than $ 150,000 subject to applicable indexation, IPPs shall not include security cost in the capacity charge invoice and CPPA will not pay any amount on account of security cost for the respective project.
The determined security cost for each year of the construction period in lump sum with arrears, if any, will be paid by the IPPs to the relevant ministry/agency designated for the purpose and the same will be included in the capital cost of the project at the time of COD adjustment. In case the agreed construction period under the PPA is less than the allowed construction period under the tariff determination, IPPs shall ensure that the total amount paid to relevant Ministry/Agency on account of security cost during the construction period is equal to the total amount for the construction period assessed under the tariff determination. CPPA-G will submit a report every five years regarding the status and implementation of the decision in the matter.
Copyright Business Recorder, 2017