• Wants to extract Rs146bn in quarterly tariff adjustment from consumers in six instalments to minimise ‘price shock’

ISLAMABAD: The rising electricity costs appeared to have put the power companies in a vicious cycle of declining consumption and shifting resultant additional capacity charges to consumers, compelling the government to seek staggered imposition of Rs146 billion quarterly charges in six months, instead of three months to minimise the ‘price shock’.

The situation emerged at a public hearing organised by the National Electric Power Regulatory Authority (Nepra) on the government request for Rs5.40 per unit additional quarterly tariff adjustment (QTA) to consumers for April-June 2023 when the Power Division made a departure from its petitions. It requested that consumers should be charged at a rate of Rs3.55 per unit for six months, instead of Rs5.40 per unit for three months, to reduce the price shock on consumers still struggling to absorb 26pc increase in base national rates notified last month.

Also, the Power Division proposed that even the Rs3.55 per unit additional charge should be imposed after September when an existing quarterly adjustment of Rs1.24 per unit would lapse, thereby further reducing the cost increase. The net increase in tariff for six months — October 2023 to March 2024 — would thus stand at Rs2.31 per unit, a Power Division official pleaded before the regulator.

Nepra Chairman Waseem Mukhtar who presided over the public hearing said the impact of the drop in sales by about 5 billion units apparently added almost Rs150bn cost to remaining consumers which was an alarming thing.

Nepra Member Rafique A. Shaikh asked the Power Division to submit a written request for staggering QTA over six months.

The Power Division also demanded the simultaneous application of the same rates for K-Electric consumers without a separate hearing process as directed by the federal government through a policy guideline approved by Shehbaz Sharif-led federal cabinet a day before leaving the office.

Nepra Member Amina Ahmad pointed out that policy guidelines presented to her contained the approval of only the Economic Coordination Committee of the Cabinet and not the federal cabinet.

The government team, however, insisted the federal cabinet had ratified the ECC decision and promised to provide its documentary evidence. Nepra did not take an immediate decision on both requests – staggered QTA recovery in six months and its simultaneous application for KE – and promised to examine them in the light of written requests, records and relevant legal instruments.

The Nepra chairman and four other members — Rafique Shaikh, Mathar Niaz, Maqsood Anwar and Amina Ahmed — were almost unanimous in showing concern that rising electricity costs had become a serious challenge, not only for various consumer categories but the government as well. They were more concerned that chief executive officers (CEOs) of Distribution Companies (Discos) lacked clarity behind the 13pc dip in electricity sales, on which they should have raised red flags quite earlier.

Mathar Niaz Rana said the continuous rise in electricity costs was a matter of grave concern.

One of the key factors for the additional quarterly cost, according to distribution companies (Discos) and the Power Division team, was the 13pc lower electricity drawn by the Discos than estimated by the authorities concerned while setting the reference rates. It was reported that the sale of 37,645 Gigawatt hours (GWh) had been estimated for the April-June period but only 32,661 GWh could be sold.

Some of the CEOs of Discos said the drop in electricity demand was because of industrial closure mainly because of letters of credit problems, withdrawal of subsidy incentives for zero-rated industry and milder than anticipated weather conditions for the said period. For example, the Lahore Electric Supply Company (Lesco) reported that its electricity demand had dropped by 1,000MW in June to 5,200MW this year compared to 6,200MW in the same month last year.

Member Rafique Shaikh said it was a matter of concern that Discos were not clear why the demand dropped but if the industry had been closed down to the extent as Discos claimed then it was a very alarming situation for the country. Almost all the stakeholders including Nepra, Power Division and Discos were nevertheless uncertain about the factors and decided to delve deep into the data including industrial performance.

It was also noted that forecasts were made for 5pc growth in electricity demand which dropped by 13pc. The Nepra members were equally concerned over the fact that more than 350,000 applications for new connections were pending with Discos by the end of July 2023 while the demand was going down, resulting in a higher impact of capacity charges.

Published in Dawn, August 24th, 2023