KP Government Urges Federal Intervention in Energy Projects

The Khyber Pakhtunkhwa (KP) government has formally requested the federal government to ensure the retention of two of its public sector energy initiatives, the Madyan Hydropower Project and the Gabral Kalam Hydropower Project (HPP), within the Indicative Generation Capacity Expansion Plan (IGCEP 2025-35) as formulated by the System Operator (ISMO).

Tariq Saddozai, the Special Assistant to the KP Government on Energy and Power Department, has communicated this request through a formal letter addressed to the Federal Minister for Energy and Power, Sardar Owais Ahmad Leghari.

Concerns Over Project Exclusion

The letter articulates the provincial government’s dismay regarding the alteration of criteria for designating “committed projects” in the IGCEP 2025-35, which has led to the exclusion of KP government ventures. The communication emphasizes that the National Energy (NE) Plan stipulates the inclusion of all projects declared committed under the approved IGCEP 2021 as committed projects in subsequent iterations.

The omission of these projects is viewed as a clear infringement of the NE Plan, which was sanctioned by the federal government in accordance with the NEPRA Act of 1997.

Revisions to Project Criteria

The revised benchmarks introduced by the System Operator reportedly diverge from previously established standards. The KP government argues that the System Operator lacks the authority to modify criteria for committed projects during the existing NE Plan’s validity. Furthermore, the retroactive application of these revised criteria is deemed unlawful, as it represents a shift in standards mid-process.

The letter asserts that once a project gains recognition as a committed project, it should not undergo reevaluation in subsequent iterations. The revised criteria should only apply to new projects, projects not previously iterated, or those where committed projects have been abandoned. Delays in committed projects should warrant timeline adjustments for commercial operations rather than exclusion.

Progress and Rights

The KP government asserts that its projects have already achieved substantial physical and financial milestones following their classification as “Committed Projects” under earlier IGCEPs. Consequently, the KP government secured Generation Licenses from NEPRA, thereby establishing vested rights.

The provincial government maintains that once projects are designated as committed, the principle of least-cost should not be retrospectively applied during their development. The draft IGCEP 2025-35’s subjection of KP projects to least-cost evaluation, despite their committed status, is viewed as conflicting with constitutional, statutory, and regulatory frameworks.

Disparities in Treatment

The communication also draws attention to the continued inclusion of federal government projects, such as Mohmand Dam, Dasu, and Tarbela Extension-5, as committed projects in the draft IGCEP 2025-35. The exclusion of KP’s Madyan and Gabral-Kalam HPPs is presented as a discriminatory action by the system operator, which should extend equal treatment to federal and provincial power projects funded through public resources.

The KP government highlights the incongruity of its projects receiving approval from the federal government’s ECNEC of the Planning Commission while simultaneously being disregarded by the system operator, an entity controlled by the federal government.

Financial Implications

The provincial government secured concessional financing from the World Bank through the Economic Affairs Division, utilizing a multilateral lending framework guaranteed by the federal government. The exclusion of KP projects could jeopardize this lending and expose the government of Pakistan to potential loan cancellation, recovery of financing charges, and other costs.

Furthermore, the exclusion may hinder future lending to development projects in KP and negatively impact investor confidence. The KP government contends that the system operator is failing to recognize the financing arrangements established with federal government approval for these power projects.

Call to Action

Based on these points, the KP government is urging the federal government to maintain the Madyan HPP and Gabral Kalam HPP as ‘Committed Projects’ in the IGCEP 2025-35. They are also asking that the System Operator be barred from altering the criteria for project inclusion in the IGCEP, as such changes would contravene the NE Plan approved by the Council of Common Interests on September 13, 2021.