Private power plants have been found paying significantly lower discounts on imported coal than those secured through competitive government procurement, potentially adding to electricity costs for consumers.

The Power Division and the National Electric Power Regulatory Authority (NEPRA) identified major inefficiencies in the way some power producers purchase imported coal. These higher procurement costs can eventually be passed on to consumers through monthly fuel price adjustments.

The difference became clear in a recent coal tender for the 660-megawatt Jamshoro Power Plant. The government-owned plant secured a discount of $7.12 per ton from its supplier.

Some contracts involving private power producers, however, secured discounts of only $0.20 to $0.50 per ton.

The Power Division said its review found significant gaps in imported coal procurement and has issued new guidelines to improve the process. The changes could save the national exchequer up to Rs. 380 million annually.

NEPRA had already raised concerns about the coal procurement practices of a private power plant.

In one case, the regulator reviewed a six-year coal supply agreement that provided discounts of only $0.20 to $0.50 per ton. NEPRA also questioned the use of estimated future coal prices when evaluating supplier bids.

The regulator said relying on projected coal prices could weaken competition because actual prices may change in the future.

NEPRA further noted that giving greater weight to supplier discounts during the bidding process could have resulted in better offers and lower procurement costs.

The findings have put the spotlight on coal procurement practices at power plants, as differences in the prices paid for fuel can ultimately affect the amount consumers pay for electricity.