ISLAMABAD: The tariff adjustments for consumers of K-Electric involving more than Rs6 per unit has become a daunting challenge for all the stakeholders — the government, the power regulator and the Karachi based private power utility and its consumers.

While the government could not take a decision on Wednesday as to how to pass on or subsidise about Rs4.87 per unit increase in KE tariff on account of past 11 quarters (July 2016 to March 2019), the National Electric Power Regulatory Authority (Nepra) reserved the same day KE’s request for tariff adjustments for two subsequent quarters (April-September 2019) involving Rs1.37 and Rs1.44 per unit increase respectively.

Amid this indecisiveness on part of the government and the power regulator, the Karachiites are at the risk of an unpredictable increase in tariff for electricity they might have consumed three years ago and produced products already sold in the international or local market. The amounts involved are estimated to be well over Rs80bn and may require a lot of reconciliation and auditing.

The issue of quarterly adjustments for period between July 2016 and March 2019 came up for a decision at a meeting of the Economic Coordination Committee of the Cabinet on Wednesday with Adviser to the Prime Minister on Finance & Revenue Dr Abdul Hafeez Shaikh.

The ECC discussed the issue and in the light of input and discussions by the members constituted a committee comprising Minister for Power Omar Ayub Khan, Minister for Economic Affairs Muhammad Ham­mad Azhar, Deputy Chair­man Planning Commission, Secretary Finance and a representative from the K-Electric to examine the issue in detail and recommend to ECC within a week a solution and roadmap for resolving the issue, an official statement said.

Informed sources said some ECC members were of the view that passing on such a huge amount to consumers would be economically, socially and politically unviable when the prime minister had already announced a freeze on energy prices until June.

At the same time, such huge amounts could also not be left unrecovered when consumers of other distribution companies had already paid similar tariff adjustments under the uniform tariff policy in vogue across the country. The non-recovery would also mean the fiscal gap to be filled from somewhere else like government subsidy

The power division explained to the ECC that uniform tariff for each category of consumers for Discos and KE was applicable. The quarterly adjustments for all discos – except K-Electric – were determined by the Nepra June 2019, September 2019 and December 2019 and currently a consolidated uniform rate ranging between Rs1.09 to Rs2.89 per unit was being charged for various consumers of Discos.

On the other hand, KE monthly and quarterly adjustment for Power Purchase Price (PPP) indexation of O&M costs, and adjustment of T&D losses etc for eleven quarters from July 2016 to March 2019 were determined by the regulator in November last year. The power division proposed that quarterly tariff adjustment decision of Nepra for 11 quarters be notified which would result in subsidy claim of around Rs71bn up to March 2019 and from the date of notification for next 12 months the additional estimated subsidy would be Rs28bn.

Alternatively, the recommended quarterly adjustment to the tune of Rs4.87 per unit being the differential between the schedule of tariff recommended by Nepra for April-June 2019 and schedule tariff earlier recommended by Nepra and reflected in the KE notified tariff, be notified for each category of consumer, as was currently in field for consumers of Discos. Any difference between the two rates will be made available by way of subsidy amounting to Rs26bn only, the power division said.

Published in Dawn, March 5th, 2020