Panel endorses PPA in dollar terms

A sub-committee under the Parliamentary Public Accounts Committee has endorsed the government’s plan to sign Power Purchase Agreement (PPA) in US dollar terms with hydropower developers for a certain period, but raised question over some of such deals already signed.

In its report, the sub-committee formed to study the Hydropower Policy and the PPA has particularly criticised the agreement with 60MW Khimti Hydropower Project, while the report is somewhat vague in the case of the deals with 45MW Bhotekoshi, 82MW Lower Solu and 50MW Upper Marshyangdi.

Nothing has been mentioned about the PPA signed with the Kabeli Hydropower Project in the report.

“We could draw a conclusion from our study that there has been huge negligence while signing the PPA with the abovementioned projects,” said Bikas Lamsal, coordinator of the sub-committee.

In the agreement with Khimti, it has been agreed to hike the PPA rate based on US inflation (American Price index) prepared by the US Bureau of Labour Statistics, which is completely wrong and against the law, according to the report.

In the agreements signed with projects with capacities from 25MW to 100MW, Nepal Electricity Authority (NEA) has pledged to raise the rates by a maximum of eight times based on an annual rise of 3 percentage points, but Khimti has been promised a hike in the PPA rate by up to 15 times, the report has also pointed out.

Five months—mid-January to mid-June—has been considered dry season for Khimti when the PPA rate remains higher, but the dry season has been kept just four months in the case of other projects, the report states.

“This led us to believe those involved in signing the PPA with projects did it with paramount personal interest. It was done against the national interest,” said Lamsal. “NEA has to bear losses worth millions during that one extra month.”

In the case of the PPA with Bhotekoshi, some correction has been made, according to the report. The consumer price index (CPI) alone has not been considered for raising the PPA rate, but also the CPI ratio and energy factor ratio will be weighed, under which the rate can be hiked by 0-6 percentage points a year. If the ratio is less than 0.95 percent, there won’t be any hike in the PPA rate. Under the system, the loss borne by NEA is less in Bhotekoshi than in Khimti, report pointed out.

In the case of Lower Solu, 55 percent of the payment will be made in US dollar terms. The value of the US dollar has been maintained the same, the report says. But the report has not made any comment about the gain and loss from the PPA. Also, no comment has been made in the case of Upper Marshyagndi.

The report has suggested going ahead with the government’s policy of signing the PPA in US dollar terms until the payback period of loans by projects or a maximum period of 10 years. The payment has to be made in domestic currency terms for the rest of the period.

“Hardly any lawmakers and experts we held interaction spoke against the PPA signing in US dollar terms,” said Lamsal. “But there must be proper guidelines to sign the PPA so the country is not at loss.”

Source : The Kathmandu Post