ISLAMABAD: A parliamentary panel on Friday expressed concern that delays in application of legitimate increases in electricity rates for consumers of K-Electric (KE) may lead to sudden burden on consumers and cause unnecessary public unrest in Karachi.

The issue came up for discussion at the meeting of the Senate Standing Committee on Power presided over by its Chairman Senator Fida Muhammad Khan.

Additional Secretary Power Waseem Mukhtar told the committee that the National Electric Power Regulatory Authority (Nepra) had determined an increase of Rs4.88 per unit in average sale price for KE consumers and the government would accordingly issue a notification next week.

Senator Nauman Wazir Khattak said this tariff increase would be in addition to the withdrawal of Rs3 per unit discount in industrial tariff for KE consumers that had legally come to an end with effect from July 12 but was still being carried forward with any legal coverage.

He said because of wrong application of power tariff for the KE’s ­industrial consumers, the industries operating across the country under all other 10 distribution companies were at a disadvantage to the extent of Rs3 per unit. This means the industry under KE was enjoying an extra Rs66 billion subsidy when compared to their counterparts in rest of the country.

“This facility had expired six months ago but was still being continued without any legal cover and hence must be withdrawn immediately,” he said while adding that it was the incompetence and incapability of the Power Division that it did not notify the expiry of Rs3 per unit subsidy despite passage of six months.

Senator Fida Muhammad said the simultaneous implementation of two tariff decisions would add a sudden burden to KE consumers and lead to ‘severe hue and cry’.

The tariff determinations, he believed, might be legitimate on commercial and technical grounds but follies of a few people create hardships for all the stakeholders.

A Nepra official told the committee that the Rs4.88 per unit increase in average tariff has been made under previous adjustments for 11 quarters and it was the prerogative of the government to determine the amount of subsidy for various ­consumer categories under its uniform tariff mechanism across the country.

“It is now up to federal government to further take final decision on it,” he said. He explained that the delay was caused due to various litigations.

Waseem Mukhtar said the delayed determination of quarterly adjustments for the KE tariff for such a long period had also adversely affected the company’s financial position.

According to a written explanation of the regulator, the average KE tariff stood at Rs12.82 per unit before the latest tariff determination that revised it to Rs17.69 per unit with an increase of Rs4.88 per unit involving a total revenue impact of Rs106bn.

The committee members recommended tariff adjustment to be done in a gradual manner after fair application of subsidy amounts to minimise sudden financial shock to consumers.

The regulator explained that quarterly adjustments pertained for period July, 2016 to March, 2019. It said the regulator decided the reconsideration request of KE multi-year tariff (MYT) 2017 for the period from FY2016-17 to FY2022-23 (seven years) on July 5, 2018 that sent average sale rate at Rs12.81 per unit.

KE challenged this decision in Sindh High Court that granted stay order regarding notification of the determined tariff.

KE later withdrew its petition from the SHC and the MYT 2017 was notified by the federal government on May 22. Based on MYT mechanism and the latest notification, the regulator was required to review and revise the approved tariff on monthly, quarterly and annual basis.

The impact of monthly variations in KE’s own generation fuel cost component as well as power purchase price (PPP) to the extent of targeted losses has to be adjusted on quarterly basis. In addition, the monthly variations in the operation and maintenance and fixed costs of the PPP are also required to be adjusted on quarterly basis.

The actual payments in respect of WWF, WPPF etc. to the independent power producers (IPPs) being passed through are to be adjusted on yearly basis upon production of verifiable documentary evidence.

Based on all these adjustments for 11 quarters, the revised tariff was worked out at Rs17.69 per unit with a total impact of Rs106bn.

The regulator said the major reason for increase was use of regassified liquefied natural gas by KE, having additional impact of Rs24bn, increase in gas prices from Rs400 per mmBtu to Rs629 per mmBtu and increase in price of furnace oil from reference price of Rs27,000 per tonne to around Rs70,000 per tonne.

Also, the increase was caused by higher operating and maintenance and capacity cost of IPPs owing to indexation and exchange rate ­variation.

It said the government currently maintained a uniform tariff across the whole country, hence the increase in the consumer tariff, if any, would be to the extent of maintaining uniformity across the country, the majority of the increase would be settled at government level, it said.

Published in Dawn, January 4th, 2020