CPPA-G Accused Of Unfair Actions Against Laraib Energy Limited

The Project submits its requests for tariff adjustments to NEPRA through CPPA-G because it is subject to NEPRA’s (Import of Power) Regulations 2017 due to its AJK location.

 CPPA-G Accused Of Unfair Actions Against Laraib Energy Limited

In regards to Operation and Maintenance (O&M) costs, M/s Hub Power Company (Hubco) has accused Central Power Purchasing Agency- Guaranteed (CPPA-G) of taking “unlawful and unfair” actions against its sister company, Laraib Energy Limited (LEL).

Laraib Energy Limited (LEL) is the nation’s and AJ&K’s first 84-MW private hydropower project. On March 23, 2013, the project reached its Commercial Operations Date (COD). The LEL tariff was approved by the National Electric Power Regulatory Authority (NEPRA) on June 13th, 2016.

The Project submits its requests for tariff adjustments to NEPRA through CPPA-G because it is subject to NEPRA’s (Import of Power) Regulations 2017 due to its AJK location.

In a letter to Additional Secretary in-charge Rashid Mahmood Langrial, the power company requested his assistance and stated that their foreign lenders required the project’s operation and maintenance (O&M) to be carried out by an internationally renowned O&M operator.

As a result, TNB Remaco, a Malaysian company, was chosen as the O&M contractor for a five-year initial period. It was only a limited scope services contract; the Project Company handled the remaining O&M scope.

Hub Power Services Limited, a sister company, took over as LEL’s new O&M contractor as of March 23, 2018. NEPRA chose the O&M portion of the tariff in accordance with the CPPA-advice. G’s Although the tariff set by NEPRA and the PPA both allow for quarterly adjustments for exchange rates and consumer price indices, they neither allow for adjustments based on actual costs or changes in the O&M contractor.

In November 2018, CPPA-G asked NEPRA to assess the costs of LEL’s new O&M contractor and, if savings could be found, request a reduction in the O&M tariff. NEPRA urged CPPA-G to renegotiate the O&M tariff in the future, taking savings into account. However, in an illegal attempt to unfairly prejudice LEL and put them in financial distress, CPPA-G unlawfully withheld their application for quarterly indexation.

Laraib Energy Limited intervened, and the CPPA-G changed the application to exclude the O&M component. NEPRA submitted it for quarterly indexation for July to September 2021. Initially, the O&M component was not included, but NEPRA later approved the full indexation, including the O&M component.

Nepra noted that CPPA-G was not concluding the negotiations with LEL or supporting LEL’s request for the indexation of the O&M component of the tariff in its ruling on LEL’s motion for review. The Authority noted that this situation, if allowed to persist, was unsustainable because it would make LEL’s cash flow issues worse.

According to CEO Hubco, Haroon Masood of CPPA-G played a significant part in creating this baseless issue and is pursuing it against LEL in an unprofessional and vindictive manner. At the hearing for MLR, LEL was accused of misrepresenting itself by Haroon Masood of the CPPA-G. As stated in NEPRA’s decision on the MLR, CPPA-G failed to provide evidence to NEPRA in support of his claim.

The Authority took note of CPPA-concerns G’s regarding LEL’s misrepresentation in the 2013 COD tariff adjustment application, which could result in a fine for withholding information, deceiving the Authority, and obtaining O&M components illegally. In light of the seriousness of the allegations, the Authority ordered that discussions between CPPA-G and LEL be held within two weeks.

M/s Hubco claims that CPPA-G has yet to respond in writing regarding the matter of misrepresentation. Similar to this, during a meeting to discuss O&M tariff negotiations, Haroon Masood threatened to offset LEL’s receivables from CPPA-G with the alleged savings in O&M.

LEL brought a writ petition against the CPPA-coercive G’s behaviour, which amounted to unilaterally amending the PPA, before the Islamabad Court.

“LEL is not required by contract to renegotiate the O&M tariff after changing the O&M contractor. However, LEL agreed in good faith to negotiate, address all genuinely held CPPA-G concerns, and even put forth a just resolution in light of NEPRA’s advice.

However, Kamran Kamal wrote in his letter that “CPPA-G continues to take an unreasonable and coercive stance during negotiations and also continues to use unfair means by attempting to withhold LEL’s O&M indexation, which has delayed our rightful billing and caused LEL significant financial loss.

M/s Hubco has requested that Secretary Power take note of CPPA-G’s illegal and unfair actions, particularly Haroon Masood’s unfounded and untrue accusations against LEL.