The audit of agreements with independent power producers (IPPS) has resulted in lifetime savings on RS1.3 trillion as the government is working to pass on these savings to consumers, revealed the power department on Tuesday.

Electricity consumers have paid RS2.5 to 2.8 trillion annually to IPPs as capacity payments. Some of these IPPs have received payments without producing a single unit of electricity due to defective agreements concluded in the past.

To tackle this question, the current government decided to renegotiate agreements with IPPS to reduce capacity payments. This revision has so far led to a reduction of RS7 per year. Unit in electricity starifs. The government is still in the process of ensuring that this benefit reaches consumers, Power Division said.

At a recent cabinet meeting, Minister of Power Sardar Awais Ahmad Khan Leghari presented a review of government policies – both implemented and planned – to improve the effectiveness of the electricity sector.

The main goals included the reduction in tariffs with RS4.96 at national level in the last eight months, renegotiation of tariffs with 14 IPPs and eight Bagasse-based IPPs to ensure life savings of RS1,333 billion and policies aimed at demand stimulation.

The minister also outlined the planned reforms of the electricity sector, such as conversion of imported coal-based power plants to Thar-Kul, the development of an integrated system plan, the rationalization of net meter and the reduction of national circular debt.

He highlighted progress in the solarization of Tubewells in Balochistan and said that out of 27,000 Tubewells had already been converted 4,000, resulting in savings of approx. RS100 million due to losses to the power sector in the province.

The Minister also detailed the steps taken by the government to reduce the inefficiency of distribution companies (discos) and explained that policies had been implemented to improve the sector’s governance by increasing transmission and distribution efficiency.

Under a revised agreement, it was learned that 14 IPPs had accepted the new terms and conditions for agreements, including the return of excess profits to the tune of RS31 billion – compared to the original requirements of RS55 billion and waived requirements for late payment interest (LPI) at outstanding amounts.

On the other hand, the government agreed to close ongoing investigations from the National Accountability Bureau (NAB) and the National Electric Power Regulatory Authority (NEPRA) against certain IPPs.

The potential buyers of UPL and UPL-II agreed to waive their claims on LPI benefits to a value of RS62.5 billion on condition that the government would facilitate the LPI requirement from Oil and Gas Development Company Limited (OGDCL) from UPL and UPL-II, equivalent to RS46 Milliaries.

Similarly, five IPPs on the Sui Northern Gas Pipeline Limited (SNGPL) network had also waived their LPI Goods at RS 4.6 billion, provided the government would facilitate the LPI claims from SNGPL, which amounted to RS1.9 billion against the IPPs.