Key Takeaways
- Nepra has objected to proposed tariff modification for Suki Kinari Hydropower Project.
- The project company seeks a 4% increase in tariff, with a significant rise in Water Use Charge.
- Nepra questions various cost components and justification for additional security infrastructure.
National Electric Power Regulatory Authority (Nepra) has raised concerns over the proposed tariff modification for the 884-MW Suki Kinari Hydropower Project, with the project company seeking an increase in its levelised tariff from Rs9.04 per unit to Rs9.40 per unit, a 4% increase.
A major portion of the proposed tariff increase is attributed to a substantial upward revision in the Water Use Charge (WUC), which the project company has sought to increase from Re0.15 per kWh to Re0.425 per kWh, a 183% increase.
The proposed increase in WUC alone is estimated to have a cumulative impact of around Rs25 billion on consumers over the remaining life of the project, according to documents.
Nepra has sought detailed justification from the project company on various components of the proposed tariff modification and associated changes in project cost. The authority has questioned whether the design changes and the resultant reduction of USD 28.604 million in Engineering, Procurement and Construction (EPC) cost are justified.
At the same time, Nepra has sought justification for an additional cost of USD 28.985 million claimed on account of permanent diversion of the N-15 Highway. The project company has also claimed additional costs of USD 11.372 million and Rs915.180 million for the addition of two banks of 3×22 MVAr shunt reactors and associated consultancy services.
Another major issue relates to the proposed revision in the project’s contract capacity from 861.548 MW to 875.160 MW following an increase in installed capacity from 870 MW to 884 MW. Nepra has also questioned the proposed addition of Provincial Sales Tax on Services, of a non-adjustable nature, in the project cost.
The authority has asked whether such taxation, imposed after determination of the reference tariff, can appropriately be incorporated into the project cost. Nepra has also sought clarification on the incorporation of changes in applicable Sindh Infrastructure Cess rates into the project cost during implementation of the project.
One of the key issues flagged by Nepra is the proposed increase in the Water Use Charge from Re0.15 per kWh to Re0.425 per kWh. The authority has specifically asked the project company to establish whether the proposed revision is justified.
Nepra has also questioned the proposed methodology for calculating Interest During Construction (IDC) and interest during the operational period through adoption of a 360-day convention. The regulator has sought justification for these and other cost components.
