Latest news with #CPPs
Business Recorder
16-07-2025
- Business
- Business Recorder
Pakistan's power sector held captive, now there are signs of breaking loose
In Pakistan's complicated energy sector maze, a quiet battle has had the government and industries engaged, one that pits the struggling national grid against captive power plants (CPP). The arrangement came under scrutiny by the International Monetary Fund (IMF), and some progress has been made. Captive power plants, set up by industries that took advantage of natural gas at cheaper rates, have now been penalized, so to speak, with a levy that make them more expensive than the grid in some cases. Industries operating on CPPs have resisted integration with the national grid – already operating in surplus capacity – and this results in soaring fixed costs per unit, tightening the noose on an already strained system. These off-grid power generation units have long operated under the radar of national power planning. But as Pakistan's grid struggles with underutilization, subsequently rising capacity payments, and decreasing demand – falling by over 5% in FY-2024 – CPPs have rightfully drawn increased scrutiny from policymakers. The struggle between captive power and the national grid isn't just technical – it's rooted in distrust, economics, and survival. In the past, where power outages could shut down entire production lines, industries did what they had to: they took matters into their own hands. Out of Pakistan's 1,180 captive plants, majority are dedicated with very few serving as co-generation plants which export surplus energy to the grid. This grid, which is capable of supplying over 45,000 MW, faces a demand shortfall of over 3,000 MW because of these CPPs alone, an estimate by NEPRA, making these plants one of the largest informal sources of electricity in the country. While CPPs serve industrial needs, their unregulated growth creates problems for the broader power sector. The government and NEPRA have grown increasingly critical of captive generation, particularly in the context of excess capacity and rising capacity payments – payments to independent power producers (IPPs) for unused electricity. Moreover, inefficiency and high gas consumption stagnate the power sector. By supplying gas to these inefficient plants, more efficient grid plants are deprived of their fair share – thereby relying on expensive RLNG – which further impacts the tariff. Most CPPs in Pakistan operate at around 30% efficiency, much lower than modern grid-connected power plants, which can exceed 50% efficiency. This means CPPs consume more gas per unit of electricity generated, resulting in wasteful use of a scarce resource. Two-fold issues let this situation run amok. Initially, the policymakers turned a blind eye on captive power as they lowered industrial complaints and kept industries energized to maintain Pakistan's sluggish economic growth. On the other hand, policymakers kept growing capacity – assuming demand would grow, but a large chunk of industrial demand never showed up because those users were still running their own power plants. This has resulted in a vicious cycle hampering the grid – exacerbated by the policymakers repeating their mistakes with net-metering and solarization. Recognizing this cycle, the government has begun taking steps to discourage captive generation and incentivize industries to return to the grid. The biggest step was the withdrawal of gas for captives. Starting in 2021, only those with efficiency above 50% were allowed to continue operations with subsidized gas. By March this year, the government sharply increased gas prices for CPPs – by up to 23% – and imposed a new grid levy, raising costs to bring their generation costs on par with grid generation costs. The government also mandated industries to maintain dual connectivity with the grid and demonstrate they can switch to grid supply during peak hours with proposals to impose surcharges or wheeling charges on self-generation, especially if they are connected to the grid only as backup. Pakistan's total installed capacity stands at over 45,000 MW, but peak demand rarely crossed 30,000 MW in 2024. That is almost 15,000 MW of excess capacity being charged to consumers – a monstrous Rs2 trillion being excessively charged to consumers in 2024, over 60% of total electricity sector costs. Additionally, these industries – those that had the clout to install big CPPs – rendered other local players uncompetitive, inserting a layer of incentives to dump goods in the local market rather than exporting them. Still, captives are wary of switching to the grid. Their consumption patterns require dedicated sub-stations – as per NEPRA's regulations – which incur a significant cost to develop. Concerns on voltage fluctuations remain while inconsistent policies also hinder CPPs from folding into the grid. Moreover, most firms have already invested millions in CPPs. For them, switching to the grid offers only additional financial outflows – the cost of developing the necessary grid connections requiring a substantial investment of Rs 2-4 billion. But it seems like Pakistan is getting ready to shift industries to the national grid. Coordination and collaboration will be key. Assurances of grid stability, uninterrupted power supply, and facilitation during the transition are going to be key.
GMA Network
14-07-2025
- Business
- GMA Network
Legarda urges climate-vulnerable nations to protect culture, heritage
Senator Loren Legarda has called on climate-vulnerable countries to rethink outdated policies and adopt a more holistic and inclusive approach to climate action — one that protects not just lives and livelihoods, but also cultural identity, history, and heritage. Speaking at the Climate Vulnerable Forum and V20 Finance Ministers (CVF-V20) meeting on Monday, Legarda said climate change poses a multidimensional threat, especially for nations that are on the frontlines of the climate crisis. "Climate change endangers all that you see and so much more: climate change imperils not only lives and livelihoods; it threatens to erase who we are," she said. The four-term senator and longtime climate advocate stressed that risk assessments must expand beyond economics and infrastructure to include cultural well-being — from ancestral homes and sacred sites to time-honored traditions. "It is this understanding that demands we broaden our definition of risk to fully encompass the cultural well-being of our people," she added. According to Legarda, extreme heat could cost the Philippines as much as ?466 billion annually by 2030. But more than the monetary loss, she warned of the intangible costs of losing cultural heritage, forced displacement from ancestral domains, and the gradual erosion of social cohesion rooted in shared traditions. She emphasized that preserving cultural memory and indigenous knowledge must be seen as central to climate resilience. "As legislators, we are more than mere policymakers; we are the stewards of our nation's future," the lawmaker said. "We must ensure that our laws reflect an unwavering commitment to both climate action and cultural preservation." The CVF-V20 is a coalition of 74 climate-vulnerable countries, including Bangladesh, Ghana, Sri Lanka, Barbados, and the Philippines. Together, they are developing Climate Prosperity Plans (CPPs) — ambitious national investment strategies designed to harness renewable energy, nature-based solutions, and financial innovation to foster inclusive development and climate resilience. The Philippines, which holds a founding role in the V20 group, has crafted its own Climate Prosperity Investment Memorandum, aligning climate goals with economic growth, clean energy transition, and local adaptation efforts. Legarda, principal author of the landmark Climate Change Act and champion of the People's Survival Fund, urged fellow lawmakers to prioritize the implementation of the country's Climate Prosperity Plan. "Let our collective efforts safeguard our precious cultural treasures, empower our resilient communities, and build a sustainable future for all Filipinos," she said. — Sherylin Untalan/RF, GMA Integrated News
Business Recorder
19-05-2025
- Business
- Business Recorder
CPL Ordinance: Govt misses legislation adoption target: IMF
ISLAMABAD: Federal government has missed the target of adopting legislation to make captive power levy (CPL) Ordinance permanent by the end of May, according to the IMF. The shifting of CPPs to the electricity grid to boost grid demand while preserving scarce gas resources to more efficient gas-based power generators remains a reform priority for the sector. The cutoff of CPPs from gas supplies did not happen at end-January 2025 as planned, partly because approximately a quarter of CPPs were not operationally ready to move to the grid. As an alternative, the authorities decided to use the price mechanism to incentivize the shift to the grid. Specifically, a CPL was introduced on February 1, 2025, which set the price of all gas for CPPs equivalent to the industrial grid plus a 5 percent levy; the levy will increase by an additional 5 percent every six months until it reaches 20 percent in August 2026. Levy proceeds — the difference between the actual price (levy included) and the OGRA-determined CPP gas price — will be transferred to the electricity grid to reduce the average effective grid tariff (evenly across the existing tariff structure). In support this effort, the authorities have made progress in facilitating service-level agreements between Discos and CPPs, and this should continue as quickly as possible so that CPPs can reliably use the grid. The government stated that it did not immediately end captive power usage by end-January 2025 as large take-or-pay RLNG import contracts would have led to significant adverse impacts on gas CD. The government has finalised and shared with all CPPs a service level agreement which sets a performance standard, as prescribed by the NEPRA, of uninterrupted electricity supply for CPPs that connect to the grid, including penalties for Discos that are not able to meet this standard. Copyright Business Recorder, 2025
Business Recorder
15-05-2025
- Business
- Business Recorder
Textile sector may return to costlier CPPs: PD's PPP projections to Nepra draw sharp criticism
ISLAMABAD: The Power Division came under heavy criticism on Thursday for submitting what were termed unsubstantiated Power Purchase Price (PPP) projections for FY 2025-26 to Nepra and for the continuing unreliable power supply by distribution companies (Discos). Concerns were raised that these issues could drive the textile sector back to costlier Captive Power Plants (CPPs), despite grid electricity being comparatively cheaper. The National Electric Power Regulatory Authority (NEPRA) held a public hearing chaired by Waseem Mukhtar, with participation from Member (Technical) Sindh Rafique Ahmad Shaikh, Member (Technical) KPK Maqsood Anwar Khan, and Member (Law) Amina Ahmed. Discussions revolved low hydrology levels, inflation, interest rate forecasts, GDP growth, solar tariffs, and fuel price assumptions. The Power Division team, led by Additional Secretary Mehfooz Bhatti and CPPA-G's Naveed Qaiser, presented seven scenarios using sensitivity analysis based on demand, hydrology, fuel prices, and exchange rates. In scenario one, CPPA-G has projected PPP at Rs 24.75 per unit, scenario 2- Rs 26.04 per unit, scenario 3- Rs 25.88 per unit, scenario 4- Rs 26.33 per unit, scenario 5- Rs 26.70 per unit, scenario 7- Rs 26.55 per unit and scenario 7, Rs 26.22 per unit. In response to a question, the representative of CPPA-G said that scenario 4 and 5 are likely to be implemented next year. Across the analyzed scenarios, indigenous fuels constitute 55% to 58% of the overall energy mix, while clean fuels contribute between 52% and 56%. Scenario 5 — marked by a high exchange rate of Rs 300/$, low hydrology, standard fuel prices, and normal demand—yields the highest projected PPP at Rs. 26.70/kWh. In contrast, Scenario 4 which assumes normal demand and an exchange rate of Rs 280/$, results in the lowest PPP at Rs. 24.75/kWh, primarily due to reduced capacity charges. Policy overhaul needed for textile sector CPPA-G representative Naveed Qaiser noted that the GDP growth, inflation and interest rates were projected on the information from IFIs, Finance Ministry and domestic financial experts. Amir Sheikh from Lahore stated that industry demands that electricity tariff decreases and in no way increases from July onwards as compared to the April/May/June quarter. 'Already the quality of power from grid is very poor resulting in up to 10% production loss as compared to captive generation and industry is considering switching back to captive. If tariff also increases, then it would lead to big fall in consumption,' he said adding that despite major renegotiations with IPPs, industry is amazed that the proposed tariff for next year is almost the same as last year and the benefit from renegotiations is nowhere to be seen. 'The various price deductions that were announced by Nepra were all time-bound till June. Therefore, if base tariff is not decreased from July 1, 2025 the tariff may increase by Rs 5-6 after the benefit of negative QTA and FCA will be over,' Amir Sheikh said. Chairman Nepra Waseem Mukhar directed Power Division to look into the viewpoint of industry, especially with recent poor quality of power supply from Discos, which is an irritant for industry and to provide future projections of power rates so that industry can make its plans accordingly. Mehfooz Bhatti, Additional Secretary Power said that abrupt suspension of supply is a serious issue and he would look into it through Power Planning and Monetary Company (PPMC). Arif Bilwani said that hydrology assumptions are very critical as we are facing substantially reduced water flows because of draught like conditions. Nepra has already directed the CPPA to prepare report and share and requested that the report be displayed on Nepra website. 'GDP growth figure is also on higher side as the World Bank has revised its projections downward from 2.8% to 2.7%. Demand growth is also not reflecting ground realities. Consistent decline in industrial demand particularly from LSM is being reported for the last 1 1/2 years, he added. 'Benefits of renegotiation with IPPs and GENCOS is not being reflected in Capacity Payments. Further increase in CPP (Rs. 60 billion) will accrue due to Jamshoro imported coal power plant. There is no mention/impact of renegotiation with the left out IPPs, GENCOs & Chinese power plants,' Bilwani argued. Kibor has been assumed at 11.9% although it is expected to be further reduced during the year reaching single digit. Inflation has been assumed at 8.65% which is extremely high, although the country is already witnessing, as per GOP, the lowest inflation in decades. There is a need to readjust the two figures. Bilwani further stated that the impact of solar Net Metering has not been properly accounted for in the assumption and requires to be looked at. The representative of Punjab Power Board enquired as to what was the financial impact of renegotiated IPPs and have the PPAs been made part of the assumption as projections of capacity payments are the same as last year. Naveed Qaiser responded that government had projected Rs 4 trillion reduction in capacity but reduced it to Rs 2 trillion to 2.4 trillion due to COD of Jamshoro Power Plant which will cost Rs 60 billion and Shahtaj Sugar Mills. Member KPK, enquired as to how much will the industrial tariff be reduced? The representative of CPPA-G stated that electricity rates can be reduced from 1 per cent to 8 per cent. According to Qaiser, projections for GDP growth, inflation, and interest rates are based on input from IFIs, Finance Division and other relevant entities. Nepra Chairman Waseem Mukhtar instructed the Power Division to take the concerns of industry seriously, particularly regarding poor service quality from Discos and future power pricing so industries can plan accordingly. Bhatti acknowledged that sudden power interruptions are a major issue and added that there is a commitment to addressing them through the PPMC. Tanveer Barry, representative from KCCI Karachi said that the projected power purchases ranges between Rs 24.75/kWh and Rs 26.22/kWh is still very high. This level of tariff undermines industrial competitiveness and increases the cost of doing business and may deter export growth. He further argued that the government claimed that it has saved trillions of rupees through negotiated agreement but capacity charges are still very high. In Pakistan industrial sector is paying almost double the electricity price as compared to other regional countries. Time of Use power tariff structure for industrial consumers should be abolished. Industrial consumption is declining because of expensive electricity. Expensive power plants should be shut down and replaced with efficient power plants and renewable energy. Rehan Jawed stated that the government should take a decision on net metering otherwise it will be become a big issue for the power sector like IPPs issue. The representative of Aptma, Amir Riaz criticised the planners for making irrelevant decisions. He proposed integrated approach to reduce electricity rates for the industry. Copyright Business Recorder, 2025
Express Tribune
29-01-2025
- Business
- Express Tribune
Gas price hike may result in misuse
Listen to article ISLAMABAD: A cabinet minister has feared misuse of 63% of cheaper industrial gas in power generation by factories, stating that owners of captive power plants (CPPs) may exploit any lacuna and can also try to seek stay orders from courts against price hike. Minister of State for Finance Ali Pervaiz Malik has urged the government to notify a transparent mechanism so that gas priced at Rs2,150 per million British thermal units (mmBtu) and meant for industries was not used in place of Rs3,500-per-mmBtu gas for CPPs. The current mechanism can facilitate this misuse. The development comes amid disclosure that in Sindh and Balochistan nearly 2,100 industrialists already have stay orders and they did not pay a whopping Rs172.5 billion on account of gas infrastructure development cess (GIDC), despite recovering it from consumers years ago, including from farmers. Malik has written to Finance Minister Muhammad Aurangzeb, who is also the chairman of Economic Coordination Committee (ECC) and to the Cabinet Division secretary, asking them to stop the misuse of recent price hike through a new transparent mechanism. The ECC last week approved an increase in gas tariff for CPPs from Rs3,000 to Rs3,500 per mmBtu to provide energy at actual price. It also instructed the Petroleum Division to take necessary measures for imposing a grid transition levy on CPPs to enhance energy sector efficiency. It was done to implement the International Monetary Fund (IMF) condition to either disconnect CPPs' gas connection or make it more expensive than grid electricity to discourage its use. The government has decided not to discontinue gas supplies but will raise rates to the level where gas-based power generation will be at least 5% expensive than grid electricity. The IMF condition to disconnect gas connections of industrial units, known as CPPs, was imposed on the assumption that those plants were running at 30% efficiency and gas should be diverted to more efficient liquefied natural gas (LNG)-based power plants. "Further to the ECC decision taken on gas supply to captive power generators, as stressed in the meeting, it is of paramount importance now that Petroleum Division notify a fair transparent process whereby it would be ensured that no open-cycle captive power plant is operated on an industrial connection allowed for process only," wrote Malik to the ECC chairman. After the price hike, the gas rate for CPPs is Rs3,500 per mmBtu, excluding levy, which is 63% expensive than the price of Rs2,150 for industrial connections. This provides an incentive to misuse gas. Industrialists in Sindh easily get stay orders from courts and there are concerns that the new price hike may also be challenged. Malik wrote that the Attorney General of Pakistan Office must be engaged for timely disposal of all pending litigations prior to the gas price revision. It was essential to ensure a level playing field and punish delinquency across Pakistan, he stated. In Sindh, the industrialists have challenged the government's decision to charge a mixed price for local and imported gas, and obtained stay orders. In this backdrop, the minister of state for finance has expressed fears that the new price hike may lead to the misuse of industrial gas and can also be challenged in courts. This will put Punjab-based industries at a disadvantage. Salman Siddiqui, a spokesman for Sui Southern Gas Company (SSGC), which supplies gas to Sindh and Balochistan, said that some CPPs had challenged the blended price mechanism, which was pending adjudication in the Sindh High Court. The government is currently charging CPPs a blended ratio for indigenous gas and re-gasified LNG at 60:40 for winters and 80:20 for summers. The spokesman clarified that there was no litigation against price notifications of February 2024 and July 2024 and industrialists had challenged only the blended gas price formula. He said that on SSGC network, there were 828 CPPs, of which 148 had already been closed due to default on payments, with average daily consumption of around 200 million cubic feet (mmcf). The company is recovering litigation cost from consumers through its revenue requirement. Due to stay orders, the company suffers cost in terms of additional legal expenses and legal costs are claimed in revenue requirement and Ogra after proper due diligence allows it, he added. The spokesman said that a case regarding GIDC was also pending before the Sindh High Court, which reserved its judgement on September 21, 2024. Total outstanding dues on account of GIDC stand at Rs184.7 billion on SSGC network and Rs172.6 billion is stuck in stay orders, said the spokesman, adding that 2,092 customers had obtained stay orders out of 2,336 clients. He said that SSGC's role for GIDC, under the GIDC Act 2015, was of a collecting agent on behalf of the federal government.
