IPPs reject reduction in electricity tariffs, citing breach of contracts

WEB DESK: Independent Power Producers (IPPs) have refused to lower electricity tariffs, including capacity charges, documents reveal. Several IPPs have allegedly been violating agreements with the government for years.

According to sources from the Pakistan Electric Power Company (PEPCO), the owners of the IPPs have clearly stated to the government that tampering with the agreements could prove costly.

They demanded that the government first reduce the rates of its own 52 per cent power plants and revoke the unjust 38 per cent taxes imposed on electricity bills.

According to Express News, the IPPs’ owners argue that globally, tax authorities collect their own taxes, while Pakistan’s Federal Board of Revenue (FBR) incompetently collects taxes through electricity bills.

Ministry of Energy documents disclose that eight power plants have been completely shut down for the past four years. China Power, with a capacity of 1,200 megawatts, produced electricity at an average of just 2 per cent during 2022-23, while the 1,249-megawatt China Hub plant remained non-operational throughout 2023-24.

Furthermore, nine IPPs have not undergone a capacity test since 2014, even though annual heat rate tests are a mandatory requirement under the agreements. In 2022-23, 36 IPPs generated minimal electricity but still received Rs487 billion in capacity charges.

PEPCO sources added that due to the high cost of electricity, thousands of industries, including textile, steel, and plastic sectors, have shut down across the country.

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