ISLAMABAD: The power regulator has raised the national average tariff by around Rs5 per unit to ensure Rs3.28 trillion in funds to the loss-making power distribution companies (Discos) during the current fiscal year.

The Rs4.96 hike, set to come into force from July 1 after formal notification by the government, would provide Rs477bn in additional revenue to Discos. However, the government can adjust different rates of increases for various consumer categories through cross-subsidy, though without affecting the overall revenue requirement determined by the regulator.

The revised national average tariff for the 2023-24 fiscal year has been determined at Rs29.78 per unit (kilowatt-hour, or kWh), which is Rs.4.96 per unit higher than the previously determined national average tariff of Rs24.82, the National Electric Power Regulatory Authority (Nepra) said in a statement.

The increase was necessitated mainly because of the rupee’s devaluation, high inflation and interest rates, addition of new capacities and overall low sales growth, it added.

Nepra also notifies Rs1.45 per unit fuel cost adjustment for KE consumers

An official said the real applicable average national tariff would now stand between Rs50 and 56 per unit after including surcharges, taxes, duties and levies, besides monthly and quarterly adjustments.

The major increase was seen in the capacity charges, which increased to Rs17 per unit from Rs11 last year with a financial impact of Rs623bn, or Rs5.94 per unit.

This was partially offset by Rs2.6 per unit reduction in energy charge, i.e. from Rs10.20 to Rs7.63. The overall capacity charges are projected at Rs1.87tr for the current fiscal year against Rs1.25tr last year.

The distribution margin to Discos has also been raised by 94 paise per unit to Rs3.1 (Rs341bn) besides various prior-year adjustments of Rs73bn (67 paise per unit) for the current year compared to Rs42bn last year.

This was one of the key requirements of the $3bn standby arrangement (SBA) signed with the IMF to ensure “further progress on structural reforms, particularly with regard to energy sector viability and SOE governance”.

Last year too, the government increased the national uniform electricity tariff by Rs7.91 per unit, involving an additional financial impact of Rs893bn on consumers. As a result, the electricity consumption dropped by 2.6pc, but the increase in power sector circular debt continued throughout the year.

Although Karachi’s power utility K-Electric was not part of the tariff-setting exercise for Discos, the same rate would ultimately be applicable to its consumers owing to a uniform base rate applicable across the country.

On Friday, Nepra also notified Rs1.45 per unit increase in K-Electric’s charges on account of a monthly fuel price adjustment for electricity consumed in May. It will be recovered from consumers in upcoming bills.

The regulator said the electricity sales of Discos were anticipated to drop from 113,002 gigawatt-hours in the 2022-23 fiscal year to 110,165 GWh in 2023-24, down by 2,837 GWh.

The sales revenue for all the Discos was thus projected at Rs3.281tr for the next fiscal year compared to Rs2.8tr last year.

Nepra said it reached the decision based on petitions filed by Discos to meet their revenue requirements and permissible transmission and distribution losses. “The determined tariffs are intimated to the federal government to file uniform tariff application. The uniform tariff so determined by Nepra after incorporating the amount of subsidy/surcharges as intimated” and notified by the government were then charged to consumers, it said.

It said that Mepco, Gepco, Hesco, Sepco, Qesco, Pesco and Tesco — the power companies for Multan, Gujranwala, Hyderabad, Sukkur, Quetta, Peshawar and tribal areas — had filed requests for adjustment or indexations under multi-year tariff regime for 2023-24.

Moreover, Iesco, Lesco and Fesco — power companies for Islamabad, Lahore and Faisalabad — filed multi-year tariff petitions for 2023-24 to 2027-28 fiscal years, and also requested interim tariff for 2023-24.

Published in Dawn, July 15th, 2023