ISLAMABAD: Bringing an ongoing bickering within the regulator to the public domain, the National Electric Power Regulatory Authority (Nepra) on Thursday announced an 85 paise per unit negative fuel cost adjustment (FCA) for electricity sold to consumers of power distribution companies (Discos) in August at a higher rate.

The decision, reached by a majority vote of 4:1, followed an unprecedented month-long delay after a public hearing on Sept 26. However, the division within the five-member Nepra board has exposed unknown inefficiency costs, flagged by both the tariff and technical members of Nepra — each responsible for critical financial and technical aspects of the power sector.

The negative FCAs during the current fiscal year come primarily due to a 20 per cent increase in base tariff, effective from July 1, 2024, to June 30, 2025.

The Nepra’s member tariff, Mathar Niaz Rana, however, raised questions on allowing Rs8.4 billion past arrears to bagasse-based power plants and demanded that the FCA be cut by Rs1.28 per unit.

Regulator’s member questions Rs8.4bn past arrears allowed to bagasse-based plants

He also demanded that the fuel costing to bagasse-based plants should be reopened for public hearing given its sharp surge from about Rs6 to Rs12.5 per unit because of its linkage to imported coal.

More interestingly, most of the bagasse-based plants have already caved in to the government’s negotiating team of civil and military officials to reduce their tariffs and give up their price linkage to imported coal.

The minor relief in FCA notified by the regulator would hardly be available to consumers during the current month for that fact that their bills already stood issued and mostly paid by the consumers.

The FCA for August 2024 should “be reflected in the billing month of October 2024; however, for consumers whose bills have already been issued, the adjustment shall be reflected in the billing month of November 2024”, the notification said.

The regulator said that even the 85 paise per unit cut in FCA would actually work out at 49 paise relief given the expiry of 37 paise per unit negative FCA for the previous month. The lower FCA would not be available to domestic consumers using up to 300 units per month, electrical vehicle charging stations and pre-paid electricity consumers of all categories. Practically, only about Rs3bn would get out of Discos’ accounts against a total FCA refund calculated by the regulator at Rs10.5bn.

Mr Rana, the member tariff, recalled that consumer representatives raised concerns over proposed adjustments, especially the bagasse-based tariff which led to an increase in the FCA. “It was pointed out that a public hearing, mandated by law, was not conducted to get consumers’ views on this issue and this oversight renders the decisions legally flawed and invalid from the outset,” he said, adding that Nepra members knew that there had been widespread consumer criticism regarding the bagasse-based tariff, deemed excessively high and approved without adequate consumers’ participation.

The member tariff observed that this had led to unexpectedly high tariffs, even surpassing local coal prices that required an urgent attention. He said the bagasse tariff stood at Rs5.982 per kWh in June, remained unchanged in July 2024, but sharply rose to Rs12.48 per kWh in August 2024, while the local coal tariff saw a more gradual increase from Rs11.03 per kWh in June to Rs11.33 in July and Rs12.27 in August this year.

Mr Rana also pointed out that the Ministry of Energy had also objected to the bagasse-based tariff through a reconsideration request and he had also “disagreed with the learned authority’s decision to dismiss the Ministry of Energy’s reconsideration request on legal grounds” and looking at the merits of its case.

He demanded that the ministry’s request be revived as Nepra had also given such reconsideration facility to K-Electric and Thar Energy Limited. “The ministry’s request, made in the interest of consumers, still merits serious reconsideration, even if it necessitates a flexible interpretation of the applicable legal provisions,” he contended.

In an additional note, Nepra’s member technical also pointed out “serious inefficiencies” afflicting the power sector and financially burdening electricity consumers. He pointed out Rs5.1bn financial impact of systemic constraints in August alone, mostly in transmission network, but also contractual obligations of RLNG power plants. He said power plants in the south region had an average generation cost of Rs14.50 per unit but remained frequently unutilised and instead marginal plants costing between Rs43 and Rs47 per unit had to be utilised, exacerbating financial strain.

The member technical also pointed out that capacity payments were being made for 4,000MW of Lahore-Matiari transmission line despite its average utilisation of merely 39pc and a peak utilisation of just 62pc since its inception. Additionally, the operational inefficiency of the Guddu plant, which has been running on open cycle mode, has resulted in an estimated loss of Rs108bn to date.

Published in Dawn, October 25th, 2024