Islamabad: The National Electricity Regulatory Authority (Nepra) approved a Transmission Service Charge (TSC) of 0.1584 / kWh (O&M component, including National Transmission and Despatch Company Ltd – NTDC – local component and insurance component of HVDC Matiari – Lahore Transmission Line) from March 18, 2021 to June 05, 2021 for 800 MW and from June 06, 2021 to September 01, 2021 for a demonstrated maximum capacity of 2200 MW certified by an independent engineer.
The authority announced its decision on a tariff review request from Pak Matiari-Lahore Transmission Line Company (PMLTC). It also rejected the petitioner’s requests, including the extension of the Required Commercial Operation Date (RCOD) citing different rules.
The project established under the CPEC ± 660 kV HVDC Matiari-Lahore transmission line has successfully reached its commercial operation date on September 1, 2021 in accordance with the schedule agreed between NTDC and Pak Matiari-Lahore Transmission Line Company (PMLTC) .
The company in the tariff change request in this case argued that the company and NTDC agreed to extend the RCOD as defined in Article 1 of the Transmission Service Agreement (TSA) on May 14, 2018 from 27 months to 33 months in accordance with the terms and conditions agreed in the memorandum of understanding of February 18, 2021.
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PMLTC requested the following changes in its tariff determination: (i) modify the RCOD from March 1, 2021 to September 1, 2021 and allow the same as the pre-COD period; (ii) allow TSC on the maximum capacity demonstrated for the pre-COD period (based on a low and high power test); (iii) allow the loss of revenue of around Rs 14 billion during the pre-COD period (i.e. from March 1, 2021 to September 1, 2021) as an exceptional cost element in the cost of the project when adjusting the DOC; (iv) approve the payment and trial mechanism as set out in the Transportation Service Rider and the Implementation Rider; and (v) to allow the provisional indexation of the benchmark tariff components (Rs 1.37 / kWh) until the moment of the final one-off adjustment of the modified modified tariff determination.
The authority held a hearing on June 17, 2021, during which the views of all parties concerned were presented.
It has examined the petitioner’s observations and the documents submitted by the company and NTDC in support of its claim. The authority observed that the defects in the transmission line were recognized by both parties, namely NTDC and PMLTC in documents dated November 30, 2020. the certificate of readiness was issued by engineer M / s CESI of PMLTC, December 1, 2020. Subsequently, a low power test was performed on December 2, 2020, which resulted in an in-line frequency swing. As a result, a notice of dispute was issued by NTDC to PMLTC on December 11, 2020 in which NTDC highlighted certain contractual requirements which were then resolved through a memorandum of understanding between the two parties on February 18. 2021. The Authority also noticed that NTDCL was not able to provide total capacity of 4400 MW for the test of the high power transmission line.
The PPIB said during the hearing that due to the pandemic, performance and contractual obligations were not met on time. As a result, the legal battle started between the companies i.e. NTDC and PMLTC. In this scenario, the PPIB, MOE, NTDC BoD and PMLTC have agreed to postpone / delay the actual COD by six months to make it usable for everyone. In this scenario, the MoU was signed with the mutual consent of both parties on February 18, 2021.
The authority noted that in its initial decision, both parties, PMLTC and NTDC, were ordered to ensure the timely completion of their transmission line by fulfilling their contractual responsibilities. However, the failure to meet contractual obligations under the TSA was acknowledged by both parties through the Memorandum of Understanding dated February 18, 2021.
It also reviewed the extension provisions of RCOD under the TSA under section 6.1, section 6.5, section 6.6 (c), section 7.7, section 8.1 (b) or ISA section 8.3 (a) (ii) or due to a Major Event. However, no such event occurred.
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As part of the Policy for Private Sector Transmission Line Projects, 2015, a security package including CST and AI has been prepared by the GOP for private investors. Therefore, changes to security packages i.e. TSA, IA, etc. had to be approved by the ECC.
As a result, once the MoU signed by both parties, the TSA and AI changes were approved by the ECC in its decision of March 31, 2021, which is the requirement of the strategic framework. and is independent of the regulatory function. The Department of Energy (MoE) in its letter dated August 2, 2021 also pointed out that Nepra, as a regulator, can exercise all due diligence on the amount and basis of payment in order to find a balance between the interests of NTDC and PMLTC consumers.
The regulator said that in order to protect the end consumer from inefficiency, cost overruns due to delay in the completion of the project within a given period, in principle, it never allowed the extension in RCOD with associated costs to no license holder, except in the event of Force Majeure Events (FME) declared by the contracting parties, i.e. the electricity producer and the electricity buyer and approved by the GoP.
The regulator argued that in light of the evidence, PMLTC’s request for the extension of RCOD is not justified and therefore is not allowed to the company. However, PMLTC and NTDC are required to fulfill their respective contractual obligations to perform low power test, high power test, function test, etc. within the time frame agreed between the parties before September 1, 2021. PMLTC and NTDC indicated that for the question sub-period, there is no CST approved by Nepra for the use of the transmission line. Accordingly, any TSC to be cleared for this period was not discussed in the context of the relevant question.
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The petitioner has requested approval of the payment and testing mechanisms set out in the endorsement agreement and the AI endorsement agreement. However, the Authority, when considering PMLTC’s request, noted that the test procedures, schedules, demonstration protocols and payment mechanism must be agreed between the Parties (NTDC, PMLTC and IE ), so Nepra has nothing to do with this perspective.
The petitioner argued that there has been a significant change in the indexing parameters, in particular the devaluation of the Rupee / USD 104.40 to USD 160.80, changes in the local CPI of 207.30 at 269.27 and the US CPI at 241.38 to 260.47, etc. since the issuance of the tariff. determination. PMLTC argued that the consequence of the changes in the indexation parameters is substantial and detrimental to the company’s obligations to its lenders, contractors and shareholders and requested that until the final one-time adjustment of the tariff determination at the Actual COD is processed and approved by the Authority, provisional indexations on a provisional basis are provided at the PKR / USD, US CPI, local CPI and LIBOR rates in effect for the quarters concerned, as opposed to the rates provided in the pricing determination.
The Ministry of the Environment, in its letter of August 2, 2021, said there was no mention of pre-COD tariff indexation in either the amended TSA or the ECC summary / decision. Therefore, Nepra may consider the case of an indexation of tariff payments during the pre-COD period to merit in accordance with Nepra’s tariff determination, regulations and procedure.
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The authority has examined PMLTC’s request and observed that PMLTC’s position was not supported by NTDC, PPIB and MOE. In view of this, the position of indexation before COD is not legitimate in this case.
In accordance with the authority’s decision, the PMLTC reference tariff will become applicable after COD. Therefore, once the COD is reached and PMLTC submits its request for adjustment / adjustment of the relevant tariff components to Nepra, indexation to this account can be considered by the authority at that time.
In accordance with the provision of Article 7 read with Article 31 (7) of the Law on the Regulation of the Production, Transmission and Distribution of Electric Power 1997, the Authority has approved a charge for transmission service (TSC) of Rs 0.1584 / kW / h (O&M local component NTDC and insurance component) for the period from March 18, 2021 to June 05, 2021 for 800 MW and for the period from June 06, 2021 to September 01, 2021 for a demonstrated maximum capacity of 2200 MW certified by an independent engineer.
Copyright Business Recorder, 2021