ISLAMABAD: The Power Division on Tuesday confessed at a public hearing that it was pleading imposition of Rs1.52 per unit surcharge on consumers of K-Electric for tariff increase approved by Shehbaz Sharif-led federal cabinet with a major blunder and needed rectification.

Waseem Mukhtar, the newly appointed chairman of the National Electric Power Regulatory Authority (Nepra) who pushed for power tariff increases for years until recently because of his official position, presided over the public hearing on the request of the Power Division and reserved the judgment for want of written statements from relevant ministries of the federal government.

The Power Division had sought the additional surcharge to raise about Rs25 billion from KE consumers over 12 months. This is on top of an average Rs30 per unit uniform national base tariff, Rs3.23 per unit financing cost surcharge and various taxes & duties besides the quarterly tariff adjustments and fuel cost adjustments that keep on changing on a quarterly and monthly basis.

Mr Mukhtar has held various leading positions in the power sector until last year and used to lead teams who prepared summaries, cases and petitions for tariff increases in various forms, pushed their approvals from various forums and ensures implementations. His fellow members of the regulatory authority and consumer representatives highlighted various legal challenges to the petition seeking Rs1.52 per unit surcharge on all KE consumers for a part recovery of cost duly determined by the regulator but blocked by KE through stay orders for 3-4 years.

Nepra’s new head reserves ruling seeking written clarification

The climax of the public hearing was an admission by power sector team led by Joint Secretary Mahfooz Bhatti, though reluctantly on repeated quizzing by Nepra members, that the petition under discussion had a major fault. They conceded that the federal cabinet and earlier the ECC had approved the submission of the petition to Nepra for notification of Rs1.52 per unit surcharge. They also added that although the ‘intention’ was to exempt lifeline consumers from the new surcharge, the documents made part of the summary to the ECC and the Cabinet along with the approval thereof and part of the petition also envisaged Rs1.52 per unit new surcharge on lifeline consumers as well.

The Nepra members questioned the contradictory position and the legality of the verbal statements of the Power Division (PD) team or the documentary record of the petition. The members of the PD team said the cabinet had approved the surcharge by ‘mistake’ for lifeline consumers and would be withdrawn. The Nepra members wondered if the officials had the power to withdraw cabinet decisions. The PD team assured that amendment would be secured from the cabinet.

On this, some consumer representatives mostly from Karachi’s chambers and business associations who were already up in arms against the surcharge demanded that such a faux pas merited the petition to be thrown out.

Nepra Member Tariff Rafique Shaikh said the regulator would have to rehear the case because of the strange situation created by the contradictory position of the Power Division and the cabinet decision.

The Nepra members also pointed out surcharge was not in line with the government’s powers because the additional funds so raised were not within the definitions for which surcharges could be imposed namely the development of infrastructure or financial responsibility of the government.

On a question, the Power Division reported that KE’s average tariff determined by Nepra stood at Rs43.04 per unit while the applicable tariff amounted to Rs32.23 per unit and hence the federal government was already picking about Rs10 per unit as tariff differential subsidy. With the proposed surcharge, the applicable tariff would be Rs33.75 per unit on average for KE.

The power division put on record that the outstanding amount against unrecovered quarterly adjustments from KE consumers for the 2019-22 period was around Rs175bn but only Rs24.5bn was being advocated for the imposition of a surcharge. They also conceded that every tariff increase resulted in lower recoveries initially but then improved gradually.

Senior Chartered Accountant Moin Fudda pointed out that he had checked with the Ministry of Finance and the AGPR that the KE’s outstanding amount had been accounted for in the subsidy budget and there was no reason for the surcharge.

The chairman Nepra said the regulator would seek written clarification from the Ministry of Finance on the subject. He also agreed to take up the issue of a series of taxes on electricity bills at the relevant forums.

Last month, the federal cabinet approved the surcharge and directed the Power Division to complete the legal process for its collection from all consumers of KE.

Published in Dawn, August 16th, 2023