Suki Kinari Hydropower Project: Nepra objects to proposed tariff modification

ISLAMABAD: National Electric Power Regulatory Authority (Nepra) has raised over a dozen questions over the proposed modification in the tariff of the 884-MW Suki Kinari Hydropower Project, with the project company seeking an increase in its levelised tariff from Rs9. 04 per unit to Rs9. 40 per unit, an increase of around four percent. According to documents, a major portion of the proposed tariff increase is attributable to a substantial upward revision in the Water Use Charge (WUC), which the project company has sought to increase from Re0. 15 per kWh to Re0. 425 per kWh, representing an increase of about 183 percent. The proposed increase in WUC alone is estimated to have a cumulative impact of around Rs25 billion on consumers over the remaining life of the project. Nepra has sought detailed justification from the project company on various components of the proposed tariff modification and associated changes in project cost. The authority has questioned whether the design changes and the resultant reduction of USD 28. 604 million in Engineering, Procurement and Construction (EPC) cost are justified. At the same time, it has sought justification for an additional cost of USD 28. 985 million claimed on account of permanent diversion of the N-15 Highway. Nepra has also questioned the proposed revision in the project’s contract capacity from 861. 548 MW to 875. 160 MW following an increase in installed capacity from 870 MW to 884 MW. Another major issue relates to the proposed addition of two banks of 3×22 MVAr shunt reactors and associated consultancy services. The project company has claimed additional costs of USD 11. 372 million and Rs915. 180 million, respectively, for this purpose. Nepra has asked whether these costs are justified. The authority has further sought an explanation regarding the proposed mechanism for replacing discontinued PICC indices with Pakistan Bureau of Statistics (PBS) indices for Abbottabad and replacing other input elements used for indexation of civil works. Nepra has also questioned an additional claim of Rs918. 635 million for infrastructure required for special security arrangements during the construction period. And the authority has sought justification for additional infrastructure costs of Rs1, 945. 963 million, along with Rs39. 964 million in engineering consultancy services, for special security arrangements during the operational period. The project company has also sought inclusion of Provincial Sales Tax on Services, of a non-adjustable nature, in the project cost. Nepra has asked whether such taxation, imposed after determination of the reference tariff, can appropriately be incorporated into the project cost. The authority has also sought clarification on the incorporation of changes in applicable Sindh Infrastructure Cess rates into the project cost during implementation of the project. One of the key issues flagged by Nepra is the proposed increase in the Water Use Charge from Re0. 15 per kWh to Re0. 425 per kWh. The authority has specifically asked the project company to establish whether the proposed revision is justified. Nepra has also questioned the proposed methodology for calculating Interest During Construction (IDC) and interest during the operational period through adoption of a 360-day convention. The regulator has sought justification for claimed increases in project development costs, insurance costs, project management costs, owner’s engineer costs and legal service costs arising from an extended construction period attributed to the COVID-19 pandemic. It has further questioned adjustments claimed in IDC and Return on Equity During Construction (ROEDC) resulting from the extension of the construction period due to COVID-19. The project company has also claimed USD 30 million on account of COVID-19-related costs, including anti-epidemic measures. Nepra has asked whether the claim is justified. In addition, the authority has sought justification for a USD 15. 5 million claim relating to an agreement for acceleration of project progress following the COVID-19 pandemic. It has also questioned claims of USD 2. 82 million for acceleration of mechanical and electrical installation and USD 1. 742 million plus Rs243. 672 million for acceleration of wet testing of the project complex. Another issue relates to Sinosure costs. Nepra has asked whether the proposed calculation based on a cap of seven percent of total debt servicing, comprising principal and interest during the repayment period, rather than seven percent of the total assessed debt amount, is justified. The authority has also kept the door open for examination of any other issue it considers appropriate in the tariff modification proceedings. The Suki Kinari Hydropower Project is one of the major hydropower projects established under the China-Pakistan Economic Corridor (CPEC) framework. The proposed tariff modification has therefore attracted scrutiny because any upward revision in tariff and project costs would ultimately have implications for electricity consumers. Nepra has fixed October 1, 2026 for the public hearing on the proposed modification. The authority has directed all interested parties and individuals wishing to participate in the proceedings to submit their intervention requests within one week. Copyright Business Recorder, 2026

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