ISLAMABAD: Kot Addu Power Company Limited (KAPCO) is reportedly reluctant to opt to operate in the Competitive Commercial Bilateral Contracts (CTBCM) market, saying it is neither feasible nor commercially viable for the company to consider or pursue such options to participate in CTBCM any time soon, they said well informed sources Business recorder.
Mr. KAPCO, the sources said in a letter to the Chief Executive Officer (CEO) of CPPA-G, referring to his letter dated April 4, 2024 and a letter issued by (KAPCO) to CPPA-G dated February 21, 2024, each in this matter with entitled “entering into a power purchase agreement (PPA)/power purchase agreement (EPA), in relation to the extended operations of the Seller's Generating Facility (as defined in the Company's previous letter).”
According to KAPCO CEO Aftab Butt, the company reviewed the contents of CPPA-G's letter and took note of CPPA-G's statement that: (a) after the enactment of the National Electricity Regulatory Authority (Purchase of Electricity) Regulations, 2022 (the ” Regulations EPPR”), the role of power supply rests with suppliers of last resort (SoLR) (ie DISCOS and KEs to the extent of their participation in demand); and (b) that the CPPA-G will play no role in public procurement in the future.
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The CEO of KAPCO claims that as the company stated in its previous letter, in accordance with the National Electricity Regulatory Authority's order dated February 12, 2024, NEPRA has extended the original CPPA-G registration to the scope of its agency's functions as a “market operator” under the rule 3 (Registration of Market Operator) of the NEPRA (Registration, Standards and Procedure of Market Operator) Rules, 2015, to the registration of CPPA-G as a Special Purpose Agent (SPA) by NEPRA under Section 25A (Registration) of the Electricity Generation, Transmission and Distribution Regulation Act energy from 1997 (extension of original registration).
The CEO of KAPCO cited a reference to the Order specifically dealing with CPPA-G in a letter to NEPRA dated February 12, 2024 titled “Authority Order Permitting Provisional Extension of Certificate of Registration to CPPA-G as Power Purchaser/Special Purpose Agent DISCO( y)”.
In particular, the order states that: (i) NEPRA granted a certificate of registration to CPPA-G under the Market Operator Rules on 16 November 2018 to act as a market operator and purchaser of electricity/SPA ex-WAPDA Discos (original registration). When granting the original registration, NEPRA set a validity period of 15 November 2023; ii) under the original registration, CPPA-G initially performed both market operator and agency functions.
However, CPPA-G's market operator functions are now covered by the market operator's license dated 31 May 2023 granted by NEPRA under the NEPRA Act; (iii) CPPA-G submitted its application to NEPRA (via letter dated November 2022) for grant of registration as an SPA along with a draft SPA Code under Section 25A of NEPRA.
Subsequently, NEPRA published/issued public notices for soliciting comments from various stakeholders in the matter from various stakeholders on the matter of the application (including the draft SPA Code). After receiving comments/comments from various stakeholders on the draft SPA Code, NEPRA found that “substantial changes/improvements” were required in the draft SPA Code and therefore felt that “finalization of the same by CPPA-G and its subsequent approval from on the part of the Authority, it will take some time.”
As the draft SPA Code is still pending, NEPRA has decided to grant an extension of the original registration to allow CPPA-G to continue its agency functions pending NEPRA's registration as an SPA. The order further specifically states that the CPPA-G is required to comply with the terms of the order and all relevant decisions and directions issued by NEPRA from time to time. The Director General specifically referred to the last sentence of the order in this regard.
“Since NEPRA has not yet registered CPPA-G as an SPA, we note that the extension of the original registration under the order is valid. Thus, at present CPPA-G is legally authorized by NEPRA to enter into PPA/EPA for and on behalf of DISCO with KAPCO for sale and purchase of electricity generated at the generating facility,” Aftab Butt said in his letter.
Mr. KAPCO also noted that the EPPR regulations are still very nascent. Practical procedures for re-procurement by SoLRs under the EPPR are currently not in place and therefore there are still some constraints (legal, technical, financial and commercial) regarding the ability of DISCOs to undertake PPAs/EPAS as SOLRs that need to be addressed.
Additionally, the utility says the options proposed in the CPPA-G letter for its participation in CTBCM can only be useful when CTBCM is fully operational and bankable.
“As confirmed by CPPA-G in its letter, the CTBCM has indeed not yet become operational and therefore it is not possible or commercially viable for KAPCO to consider or bid for such participation opportunities in the CTBCM any time soon,” he continued.
Copyright Business Recorder, 2024