Power division seeks 1-year cap on coal supply contracts

The Power Division has asked NEPRA to restrict the term of long-term fuel contracts for coal-burning plants to a single year, according to Mettis Global. The change would be added to the Coal Procurement Guidelines and is requested to apply immediately. Plants already buy imported coal through competitive bids under a NEPRA mandate, a practice independent power producers have followed since late 2022.

A second provision would stop the cost gap from being passed on to consumers through tariffs when a plant buys from a lower-discount supplier because a higher-discount supplier defaulted. That extra cost would instead be borne by the defaulting supplier, the IPP, or both, as contracts and regulations may determine. The review cited discounts from $0.20 to $7.12 per metric tonne across plants buying from the same suppliers, measured against one international benchmark.

Separately, the Power Division has brought in a best available discount rule under which plants must buy coal solely from the contracted supplier that gives the largest discount over the benchmark. The Power Division estimates annual savings of Rs380mn for consumers, with no extra spending needed. Both measures come after a review that found the same supplier offering different discounts to different plants.