Experiences with Electricity Tariff Reforms

Transcription

1 Experiences with Electricity Tariff Reforms Presented by: Muhammad Safdar NEPRA, Pakistan ERRA Tariff / Pricing Committee meeting October 19, 2016 Bratislava, Slovakia 1

2 Experiences with electricity Tariff Reforms Introduction of NEPRA Organogram Mandate & Functions Restructuring of WAPDA Experiences of Tariff w.r.t Generation, Transmission & Distribution Sector Q/A 2

3 Organogram CHAIRMAN Vice Chairman by rotation on yearly basis MEMBER BALOCHISTAN MEMBER Khyber Pakhtunkhwa MEMBER PUNJAB MEMBER SINDH Registrar 3

4 Mandate To develop and pursue a Regulatory Framework that ensures provision of safe, reliable, efficient and affordable electric power to the electricity consumers of Pakistan. Facilitate transition from a protected monopoly service structure to a competitive environment. Maintain balance between the interests of the consumers and investors. 4

5 Main Functional Areas Licensing Tariff Performance Standards Consumer Affairs Monitoring and Enforcement 5

6 Extra High Voltage System of Pakistan HCPC (126) UCH (548) MARDAN WARSAK (240) GAZI BAROTHA (1450) BURHAN BANNU CHEP DAUDKHEL (184) KAPCO (1348) AES (695) M.GARH GUDDU CHASNUPP (310) ROUSCH (355) GATTI N.ABAD N.G.P.S M.GARH SABA TARBELA (3408) I.S.P.R NEW RAWAT YOUSAF WALA VEHARI (195) (1350) MANGLA (1000) GAKHAR SAHOWALA K.S.KAKU RAVI BUND RD: JAPAN (107) KEL (120) DADU LIBERTY (212) GUDDU (1655) 500 kv Grid Station 220 kv Grid Station 500/220 kv Grid Station (1200) HUBCO (174) KOTRI JAMSHORO TAPAL HALARD LAKHRA (150) JAMSHORO (850) KDA-33 G.AHMAD (KESC) Hydel Power Station Thermal Power Station IPPs at 220, 500 kv IPPs at 132 kv 500 kv T/LINE 220 kv T/LINE 6

7 Power Sector Players PUBLIC SECTOR PRIVATE SECTOR NEPRA Ministry of Water & Power Pakistan Atomic Energy Commission K -ELEC IPPs SPPs/CPPs AEDB WAPDA (HYDRO) PEPCO PPIB CHASHNUPP KANUPP GENCOs NTDC/CPPA DISCOs 7

8 Restructuring of WAPDA N T D C 1 CPPA-G IPPs POWER WING GENCOs 5 One Hydel Four Thermal DISCOs 12 GENERATION TRANSMISSION DISTRIBUTION Thermal Power Stations Grid Station / Trans. Lines Operation & Maintenance Area Electricity Boards TRANSFORMING THESE ORGANIZATIONAL COMPONENTS INTO INDEPENDENT CORPORATISED ENTITIES 8

9 Source Installed Generation Capacity by Type Installed Capacity (MW) % Energy Generation (GWh) Thermal 16, , Hydel 7, , Nuclear , Wind Coal TOTAL 24, , Installed Capacity (MW) Nuclear (3.17%) Wind (0.43%) Coal (0.60%) Nuclear (4.92%) Wind (0.28%) Coal (0.09%) % Energy Generation (GWh) Hydel (28.67%) Hydel (30.36%) Thermal (67.13%) Thermal (64.34%) 9

10 Dist. Cost & Loss Adj. Trans. Cost & Loss Adj. Generation Cost Chain of Cost Components Fuel Suppliers Refineries/ Gas Cos. Public Sector GENCOs Thermal / Hydel / Nuclear Private Sector IPPs Transmission / CPPA-G IESCO LESCO GEPCO MEPCO FESCO PESCO HESCO QESCO KESC CONSUMERS Residential/ Commercial/ Industrial/ Agriculture/ Others 10

11 Experiences with electricity Tariff Reforms Pricing Mechanism Stakeholders Involvement Stipulated Timeline Upfront Tariff Mode under NEPRA Upfront Tariff Regulations, 2011 (Via Suo Moto Proceedings or any GOP agency file a request with NEPRA) Cost Plus Mode under NEPRA Tariff Rules 1998 (Any person / party may file a petition along with documentary evidence to NEPRA) Stakeholders are invited to take part in an extensive consultative process, when the upfront tariff for each technology is being determined. Stakeholders are invited to participate in the proceedings through public notices published in national dailies, in both Urdu and English languages. Individual letters are also sent to stakeholders. The Authority shall decide within 10 working days of the filing of a complete application for upfront tariff. The Authority shall decides a petition within 4 months of admission, which may be extended for another 4 months. 11

12 Experiences with electricity Tariff Reforms Energy Charge - Fuel - Variable O&M Capacity Charge - Fixed O&M - Local - Foreign - Return on Equity - Return on Equity during Construction - Insurance - Debt Repayment - Principal Amount - Interest Payment 12

13 Experiences with electricity Tariff Reforms 13

14 Demand Supply Situation Financial Year ending 30th June Planned Generation Capability as per NTDC (MW) NTDC Projected Demand Growth Rate (%) NTDC's Projected Demand during Peak Hours (MW) Surplus/ (Deficit) (MW) , ,457-4, , ,816-3, , , , ,439 2, , ,725 3,491 14

15 Upfront Tariff for Different Technologies Technology Cost/kWh (US Cents) Cost/MW (Million US$) Coal Foreign Financing Thar Coal Foreign Financing Wind Solar (Foreign Financing) Foreign Financing North Region South Region Bagasse (Local Financing) Small Hydel (local financing)

16 Pricing Framework Small Hydel IRR 20% ROE 27.4% Spread over LIBOR 4.5% Spread over KIBOR 3.5% Tariff Control Period Insurance O&M Costs Timeline Coverage Opt for Tariff Financial Close Construction Period Incentives 30 years 1.35% of EPC High Head = US Cents / kwh (50%) Low Head = US Cents / kwh (65%) One year from the date of determination 18 months from date of acceptance of upfront tariff 36 months from financial close Inflation Risk, Exchange Rate Risk, LIBOR/ KIBOR change, Insurance etc 16

17 Pricing Framework Wind Tariffsx1 Project Cost (USD Million per MW) EPC Cost (USD Million per MW) Non - EPC Cost (USD Million per MW) Financing Cost (USD Million per MW) Capacity Factor (%) Levelized Tariff (US Cents/kWh) Projects Awarded Tariff % % %

18 Pricing Framework Wind Incentives IRR 17% ROE 18.5% Spread over LIBOR 4.5% Spread over KIBOR 3.0% Insurance 1% of EPC O&M Costs US Cents 1.48/ kwh Plant Factor 35% Tariff Control Period 20 Years Energy Benefit Sharing Mechanism 75%, 80% & 100% on each 1% increase on energy gain Opt for Tariff 6 months from the date of issuance of determination Timeline Financial Close One year from date of approval of upfront tariff Construction Period 18 months from financial close Coverage Inflation Risk, Exchange Rate Risk, LIBOR/ KIBOR change, Insurance etc 18

19 Incentives for Generation Companies Incentives (Small Hydro) IRR 20% ROE 27.4% Spread over LIBOR 4.5% Spread over KIBOR 3.5% Tariff Control Period 30 years Insurance 1.35% of EPC Opt for Tariff One year from the date of determination Timeline Financial Close 18 months from date of acceptance of upfront tariff Construction Period 36 months from financial close Coverage Inflation Risk, Exchange Rate Risk, LIBOR/ KIBOR change, Insurance etc 19

20 Response to Upfront Tariff Technology Opted Upfront Tariff MW In Operation Under Process Wind Baggasse Solar Coal 8,000-8,000 Small Hydel Coal and small hydel required longer time period months for achieving Commercial Operation. Similarly hydel power projects required 4-6 years for achieving the COD. In addition to above 3600 MW on LNG, 1320 MW coal power projects, 3000 MW on hydel and 600 MW IPPs converted on coal through cost plus basis has been allowed to charge such tariff which is approved by NEPRA. 20

21 d d d d d d Experiences with electricity Tariff Reforms Tariff on First Upfront Upfront Upfront Tariff Multi-year Cost-Plus Multi-year Tariff for Tariff for for Solar and Tariff for Basis Tariff for Wind Bagasse other Three other KESC technologies Distribution (K-Electric) Companies 2016 Onwards Tariff based on Competitive Bidding 21

22 Experiences with electricity Tariff Reforms - Generation Central Asia South Asia (CASA) a comprehensive initiative to interconnect Tajikistan, the Kyrgyz Republic, Afghanistan and Pakistan to form a Central Asia-South Asia (CASA) Regional Electricity Market through 500 KV, 750 KM HVDC line which will deliver 1300 MW (300 to Kabul and 1000 MW to Peshawar). Import of 74 MW (Jackigur Mand) - US Cents 6.5/kWh (depending upon oil prices) Import of 100 MW (Polan Gawadar) Under process Import of 1000 MW (Zahedan Quetta) Under process 22

23 Experiences with electricity Tariff Reforms - Distribution Determination of consumer-end tariff is determined on the basis of following steps: Revenue Requirement: How much is needed? Cost of Service: What is the each class equitable share? Rate Design: How should rates be adjusted to reflect cost of service. 23

24 Experiences with electricity Tariff Reforms Description Units Financial Year PPP-Unadjusted Rs. /kwh Energy Comp Fuel V. O&M Capacity UOSC Allowed Losses (National Avgerage) % 13.29% 15.27% 15.23% PPP-Adjusted Rs. /kwh Distribution Margin Rs. /kwh PYA Adjustments Rs. /kwh (0.07) (1.26) (0.78) PPP Adjustments Rs. /kwh (0.16) Avg. Determined Tariff Rs. /kwh Avg. Notified Tariff by GoP Rs. /kwh

25 Experiences with electricity Tariff Reforms - Distribution The revenue requirement for each Distribution Company is recovered through the following consumer categories: Residential Industrial Commercial Single Supply for further distribution Agricultural Special Contract Tariff (J) Others i.e. public lighting, railway traction etc. 25

26 Experiences with electricity Tariff Reforms - Distribution Customers Consumer Mix Consumption Mix Revenue Mix %age Domestic Commercial Industry Tube-well Others

27 Experiences with electricity Tariff Reforms - Distribution In order to minimize the cross subsidy one slab benefit was introduced: DESCRIPTION Fixed Charge Rs./kW/M. NEPR Determined Tariff FY LESCO FY Variable Charge (Rs./kWh ) Subsidy Surcharge Tariff Payable by Consumer Residential Up to 50 Units Load up to 5 kw Units Units Units Units Above 700 Units

28 Experiences with electricity Tariff Reforms - Distribution Lahore Electric Supply Company (LESCO) one of the Distribution Company examples is given hereunder: Revenue Requirement Description Unit Recovered through tariff No. of Consumers Million 4.1 Actual cost % of Cross Subsidy Sales GWh 16,962 Residential 61,857 75,836 89% Commercial 15,961 14, % Industrial Million 68,084 61, % Single Supply 5,087 3, % Agricultural 11,377 12, % 28

29 NEPRA Evolutionary Process & Way Forward After cost plus mode and Upfront tariff NEPRA is now moving towards Competitive Mode wherein indicative tariff on specific technology will be given for bidding. NEPRA has also open the transmission network to the private investors. In this regard HVDC line tariff from Matiari to Lahore is issued. NEPRA has also issued the two separate licenses to private entities for transmission network 29

30 NEPRA Evolutionary Process & Way Forward NEPRA has already issued the Multi-year tariff to the Distribution Companies which are likely to be privatized. T&D targets has been set for the DISCOM. Similarly the O&M cost and investment target have already been set vis-à-vis cost benefit relation. For bringing efficiency DISCOM have been given timeframe for achieving the targets. 30

31 Experiences with electricity Tariff Reforms Thanks 31