By Staff Reporter
ISLAMABAD: Pakistan LNG Ltd. threatened to halt gas supplies to K-Electric Ltd., the utility that powers Karachi, unless the company settles 8.7 billion rupees in unpaid bills, escalating a dispute over how much the power producer owes for imported fuel.
The state-run gas importer said in a letter dated Sept. 8 to K-Electric’s chief financial officer that the outstanding amount includes 8.5 billion rupees in principal and 200 million rupees in late-payment penalties. Pakistan LNG said it could invoke contractual rights to stop deliveries of regasified liquefied natural gas if the utility doesn’t clear the balance.
The standoff centers on how to price RLNG sold to K-Electric, which serves Pakistan’s largest city and financial hub. K-Electric has withheld a portion of its payments, arguing it’s entitled to a lower rate under a pooled-pricing formula that blends the cost of various LNG cargoes. Pakistan LNG says that formula has yet to receive regulatory approval and doesn’t apply to invoices already issued.
Pakistan LNG said its position traces directly to minutes from a July 1 meeting of the National Coordination and Management Council, a body that includes representatives from the petroleum and power ministries. The minutes, which were circulated to all attendees including K-Electric, contained two distinct instructions, according to Pakistan LNG: one asking relevant parties to study a pooled-pricing proposal, and a separate one directing K-Electric to pay its outstanding dues without delay and keep up with debt-servicing surcharge payments.
K-Electric acted on the pricing instruction while ignoring the payment directive, Pakistan LNG said.
“It records a proposal under consideration, not an approved mechanism,” the company said of the pricing plan, adding that the NCMC only called for the petroleum ministry, power ministry, Pakistan LNG, Sui Northern Gas Pipelines Ltd. and K-Electric to jointly study the idea and report back with recommendations.
Under the companies’ gas sale agreement, Pakistan LNG said, billing must follow the RLNG price set by the Oil and Gas Regulatory Authority. Any change to that pricing structure would first require guidelines from the Economic Coordination Committee, followed by a formal notification from the regulator — steps that haven’t happened yet. Pakistan LNG called K-Electric’s move to apply its own estimated pooled rate to payments a unilateral adjustment with no grounding in the contract or in regulation.
The company also cited K-Electric’s own accounting: an attachment the utility submitted, labeled Annexure-A, described its calculations as provisional pending the regulator’s notification — proof, in Pakistan LNG’s view, that no adjustment is currently warranted. Pakistan LNG said it would issue credit notes once the new pricing mechanism clears every required approval, based on settlement terms it reaches with Sui Northern.
On the underlying debt, Pakistan LNG argued the council’s instruction to pay outstanding dues carries no conditions and isn’t tied to the pricing dispute’s outcome. It said late-payment penalties accrue automatically under the contract once invoices go unpaid past their due dates, rather than being levied at the company’s discretion — meaning the pricing disagreement doesn’t excuse the utility from covering charges already billed.
Pakistan LNG said it has kept supplying RLNG to K-Electric in the “greater national interest” even as the mounting arrears strain its own finances, warning that the receivables have reached a level that now threatens its ability to pay international LNG suppliers on time. “Receivable levels have now reached a critical level,” the company said, urging K-Electric to release the full amount owed, including penalties, without further delay — or risk a halt in supply along with other remedies available under the agreement or the law.
K-Electric, for its part, disputes that it’s behind on payments. A spokesperson for the utility said the NCMC’s July 1 meeting — attended by K-Electric and other stakeholders — endorsed a unified, weighted-average RLNG pool-pricing mechanism to account for force majeure conditions affecting supply, and that the company has asked for the mechanism to be rolled out quickly so pricing and payments can be reconciled retroactively to May.
“K-Electric has been making payments based on the actual RLNG mix received for spot and normal cargoes,” the spokesperson said. “Based on payments made to date and the expected pricing under the unified pool mechanism, K-Electric estimates that it has already paid approximately Rs4.2 billion in excess, for which a corresponding credit note is expected from PLL upon implementation of the mechanism.”
The utility said it remains committed to timely implementation of the pricing mechanism and has urged all parties to move faster on reconciling the payments.
The dispute underscores broader strain in Pakistan’s energy sector, where state-owned fuel suppliers have repeatedly clashed with power distributors over unpaid bills, contributing to a chain of arrears that has hampered the country’s ability to secure and pay for imported fuel.
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