ISLAMABAD: Seeking an additional fuel cost adjustment (FCA) of Rs3.49 per unit in June’s bills, the Central Power Purchasing Agency (CPPA) on Thursday conceded that “consumers don’t want electricity from the system” as depicted by 14-17 per cent fall in consumption in April.
At a public hearing called by the National Electric Power Regulatory Authority (Nepra), the CPPA team led by its Chief Executive, Rehan Akhtar, reported that reference fuel prices did not change noticeably, but weather constraints and changing consumption patterns resulted in higher actual fuel costs.
The question-answer session exposed a series of management and planning challenges in the energy sector. It was reported that April’s consumption turned out to be 17pc lower than the reference price and 14pc lower than the same month last year. Imported LNG had been arranged in advance despite being expensive and local cheaper gas supply was curtailed at a loss to the exchequer. Also, cheaper Thar-based plants could not be utilised because of system constraints and the power demand had a large delta — peaking to 16,116MW and ebbing at 8,478MW in off-peak hours.
Moreover, the Pakistan Meteorological Department had forecast above-normal temperatures, and reference fuel price was set keeping in mind higher temperatures and arrangements for Ramazan, but actual temperatures remained much lower, and rainfall was 164pc higher than normal. In addition, lower-than-estimated hydropower was available, and the Neelum-Jhelum project also collapsed unexpectedly. 500kV transmission line from Dadu to Shikarpur also faced unexpected breakdown for almost 10 days.
Mr Aktar explained that the impact of additional FCA for April would translate into Rs32bn revenue in the billing of June. The CPPA had sought “an increase of Rs3.4883/kWh (unit)” over the reference tariff of Rs5.492 per unit already charged to consumers in April. This is almost 64pc higher than the pre-fixed fuel cost of Rs5.49 per unit and calls into question the capabilities of the power sector bureaucracy to forecast fuel costs even for 6-7 months. The additional FCAs have ranged between 50 to 115pc in recent months than pre-determined fuel costs notified at the start of the current fiscal year.
This increase in FCA is on top of about a 26pc increase in the annual base tariff and another 10pc hike under the quarterly tariff adjustment currently in place and being charged to consumers at the rate of Rs2.75 per unit. As a result, the consumers would continue to pay excessive bills as consumption increased with rising temperatures. This was despite the fact that more than 75pc share of electricity came from local resources.
In a petition, the CPPA, acting as commercial agent of Discos, demanded an additional FCA of Rs3.488 per unit in June’s bills for electricity consumed in April. It claimed that the reference fuel cost for March was set at Rs5.49 per unit, but the actual fuel cost turned out to be Rs8.98 per unit. It said about 8,639-gigawatt hour (GWh) of electricity was generated at an estimated fuel expenditure of Rs79.56bn (Rs9.21 per unit) in April, of which 8,375 GWh energy was delivered to Discos at the cost of Rs75.2bn (at Rs8.98 per unit) — lower than generation cost apparently because of some previous adjustments.
The data showed declining consumption trends. The consumption in April 2024 was almost 14pc lower than the same month (9,734Gwh) of last year, mainly because of lower temperatures and changed consumption patterns due to economic slowdown and consumers shifting to alternate sources. The Rs3.5 per unit FCA for April this year is also 75pc higher than the Rs2 per unit FCA of the same month last year.
Thus, LNG-based power generation provided the biggest share, about 25pc, to the national grid in April, replacing the usual hydropower supply. The hydropower supply came in second with a 24pc share in April, compared to 28pc in March. Hydropower has no fuel cost.
The third-biggest share in the national grid came from nuclear power, at about 24pc in April, down from 26pc in March. This was followed by an 11.2pc contribution from local gas, up from 10pc in March. Then came local coal-based power, which contributed 10pc to the grid in April, up from its 11pc share in March.
The cost of LNG-based power generation increased to Rs22.8 per unit in April, up from Rs22.2 per unit in March. The fuel cost of domestic gas-based generation slightly dropped to Rs13.25 per unit, down from Rs13.7 per unit in March.
On the other hand, the cost of local coal-based generation dropped to Rs15.8 per unit in April, down from Rs16.8 per unit in March. The imported coal-based generation stood at Rs22.85 per unit, but its contribution was less than 0.3pc.
Three renewable energy sources — wind, bagasse and solar — contributed 5.3 pc share to the grid in April compared to 4.9 pc in March. Wind and solar energy have no fuel cost, while bagasse-based generation costs remain unchanged at about Rs6 per unit.
Published in Dawn, May 31st, 2024
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