Government officials considering an increase of gas tariffs for CPPs

Government officials considering an increase of gas tariffs for CPPs

Tuesday, February 21, 2012: Pakistan is facing severe shortage of Gas. The country prime source of producing electricity is also gas and oil, but due to increasing demand for gas by CPP the commercial electricity generating units
are not getting what they need. Keeping that in mind, government officials are considering an increase of gas tariffs for CPPs.

Captive Power Plants (CPP) do not produce electricity for general public rather they generate electricity for the sole use of their owners only. As per current standings, CPP are charged a rate of Rs6 for every unit of electricity
produced. This rate is peanuts when compared to the charged to commercial electricity generating units.

The officials are thinking of raising the amount by 150 percent (which would make take the rate at Rs15 for every unit of electricity produced). This increase in rate will force the CPPs to buy electricity directly from power distribution
companies (DISCOs).

As per statistics, the share of gas used by CPPs has increased tremendously.  In 2005, the share of Water And Power Development Authority (Wapda) and Karachi Electric Supply Company (KESC) stood at 44 percent, this dropped to a
mere 28 percent by 20111.

Speaking on the matter, an official of water and power said, “Gas availability declined by almost nine per cent per annum for power generation purposes during the period. The shortages had to be met through the import of furnace
oil which cost an annual sum of Rs700 billion.”

This reduction in total share was in spite of the fact that gas supplies rose by around two per cent annually during the same period, and power sector demand rose by almost five per cent annually.

The gas supply shortfall to the power sector, due mostly to CPPs, has resulted in higher power purchase prices – forcing the government to subsidise the rates through price differential claims worth Rs300 billion annually, according
to officials.

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Posted by Wajahat Javed on Feb 22 2012. Filed under Business, Pakistan. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry