• Across-the-board tariff increase set for April-June quarter, also applies to K-Electric consumers
• Decision will help power companies collect over Rs120bn

ISLAMABAD: Notwithstanding its misgivings, the National Electric Power Regulatory Authority (Nepra) on Thursday rubber-stamped a Rs2.75 per unit increase in the uniform electricity rate for all consumers across the country, including Karachi, for three months (April to June) to help power companies mop up more than Rs120 billion in additional funds.

This hike is part of the quarterly tariff adjustment (QTA) mechanism designed to offset the financial pressures on power companies.

According to an official order, Nepra has decided to allow the “instant positive quarterly adjustments” of Rs85.275bn pertaining to the second quarter (October-December) of the current fiscal year with a uniform rate of Rs2.7492 per unit, or kilowatt-hour (kWh).

The hike will apply to all electricity users except “lifeline consumers”, who use less than 100 units monthly.

Since the tariff adjustments are now applied across the country under the government orders, the addition of K-Electric to the list will add another Rs15-20bn. Moreover, the impact of the general sales tax will take the total burden on consumers to well above Rs120bn over the next three months.

In view of the “relevant provisions of Nepra Act, National Energy Policy and the Policy Guidelines issued by the federal government, the authority has decided to allow the application of instant quarterly adjustments on the consumers of K-Electric as well, with the same applicability period”, the notification said.

Nepra’s decision comes after the government-owned power distribution companies (Discos) — such as Fesco, Qepco and Lesco — jointly demanded an additional revenue requirement of Rs85.3bn to manage the additional financial impact of higher capacity charges.

This financial strain arose out of rupee’s depreciation, interest rate hike, market operator fee, the impact of transmission and distribution losses on fuel cost adjustments, the cost of incremental consumption and variable operation and maintenance charges for the October-December quarter.

After a lot of public statements to hold the power companies accountable, the regulator on Thursday accepted almost in entirety the additional revenue demanded by Discos with a minor (less than 0.04pc) downward adjustment of legal fee and that too on procedural reasons and would be made part of Central Power Purchasing Agency’s (CPPA) revenue requirement.

It allowed Rs85.275bn additional revenue, just Rs34 million lower than the amount demanded by the Discos.

The public hearing on the subject was held on Feb 14. To consumers’ luck, the additional cost has become effective on the expiry of a similar previous quarterly tariff adjustment applicable for about six months.

Under the petitions, the Lahore Electric Supply Company demanded the highest claim of Rs15.1bn, followed by Rs14.9bn by Multan Electric, Rs11.6bn by Peshawar Electric, and Rs11bn by Quetta Electric.

They are followed by Rs9.45bn claimed by Faisalabad Electric, Rs6.92bn by Islamabad Electric, Rs3.5bn by Hyderabad Electric, Rs3.5bn by Tribal Electric, Rs2.9bn by Sukkur Electric, and Rs2.7bn by Gujranwala Electric.

The biggest chunk of an additional cumulative burden on account of capacity charges stood at Rs78bn for the quarter, followed by Rs11bn on account of the uncovered impact of transmission and distribution losses, and Rs6.6bn on account of the use of service charges and market operator fee.

On the other hand, Discos have offered Rs8.7bn worth of negative variable operation and maintenance charges and Rs2.34bn of the impact of incremental sales, thus working out a cumulative net additional cost of Rs85.275bn.

Under the tariff mechanism, changes in fuel cost are passed on to consumers only monthly through an automatic mechanism.

The quarterly tariff adjustments on account of variation in power purchase price, capacity charges, variable operation and maintenance costs, use of system charges and impact of transmission and distribution losses are built in the base tariff.

The regulator noted in its decision that Discos generally failed to adequately explain reasons for the reduction in sales.

It also expressed serious concern over the non-preparation of Discos to justify their requests and non-inclusion of certain costs, as highlighted by the CPPA in their adjustment requests.

Published in Dawn, March 29th, 2024