Revision of agreements with 14 IPPs approved to reduce power cost with Rs137bn annual savings for consumers

The federal cabinet on Tuesday approved the power division’s recommendation to revise the negotiated settlement agreements with 14 independent power producers (IPPs) aimed at reducing electricity costs and saving Rs1.4 trillion for the national exchequer. In October, the government prematurely terminated power purchase agreements with five of the oldest IPPs with the move projected to save Rs411 billion. This was followed by settlement agreements in December with eight IPPs running on bagasse, aiming to reduce electricity tariffs and save around Rs240bn for the national exchequer. The government has undertaken extensive power sector reforms, including suspending gas supply to captive power plants, fast-tracking the Competitive Trading Bilateral Contract Markets and renegotiating contracts with IPPs. These steps aim to curb the growth of circular debt in the power sector and reduce the burden of capacity payments on the government and consumers.