Cabinet opposes renewal of IPP energy purchase contracts.

• Position: Independent power producer

The cabinet has backed a proposal that opposes the renewal of power purchase agreements with independent power producers (IPPs) having 5,000-megwatt electricity generation capacity, which are expiring in a couple of years.

The proposal was submitted by Special Assistant to Prime Minister on Petroleum Division Nadeem Babar to the cabinet, chaired by Prime Minister Imran Khan.

Now, the task force on energy is working on a policy, which will be submitted to the cabinet for formal approval.

"Power purchase agreements with the IPPs including Kapco and Hubco are going to expire in coming years and the government will not renew the agreements," Babar told.

This means that the government will not continue to follow the power purchase agreements on a 'take and pay' basis, which binds the government to pay capacity charges. However, these power plants will be able to sell electricity to the Central Power Purchasing Agency (CPPA) in the summer season when demand is higher compared to the winter.

The power plants were set up under the Power Policy of 1994 and were based on furnace oil. The only flaw is that the past government had not foreseen the future scenario of prices of different...