ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) on Thursday approved about 29 per cent increase in average generation tariff for Wapda’s hydroelectric stations to meet its Rs155 billion annual revenue requirement.

Under the decision, the average generation tariff for FY23 has been allowed at Rs4.96 per unit when compared to Rs3.85 per unit in FY22. The Rs1.11 per unit increase in generation tariff would, however, not jack up the average distribution tariff for end-consumers with the same proportion but translate into a nominal additional cost of the entire electricity basket involving a much larger share of other generation sources from furnace oil, local and imported natural gas, coal, renewables and so on.

In approving the revised rates, the regulator also for the first time allowed about Rs1.10 per unit water use charges to Azad Kashmir’s Neelum-Jhelum Hydropower project on a par with net hydel profit (NHP) permissible to the provinces, particularly Khyber Pakhtunkhwa and Punjab. The 969MW plant has been supplying clean energy to the national grid since 2018 without any formal agreement with the AJK government, resulting in political and social unrest in Azad Kashmir.

The decision allowing AJK to be treated like provinces in payment of water rights would increase AJK’s share to Rs5.44bn for FY23 compared to Rs712m in FY22. Nepra has previously been disallowing water use charges to AJK on the pattern of NHP to provinces on the premise that AJK was not a province under the constitution and hence it was entitled to water use charges (WUC) at a lower rate of 42 paise per unit under the Mangla Dam agreement. The federal government had to facilitate a fresh agreement with AJK so that the regional government could be treated on a par with provinces for electricity payments.

Under the agreement, the WUC of Rsl.10 per kWh should be allowed to the AJK government on the Mangla Hydro Power Project prospectively as well as the Neelum-Jhelum Hydro Power Project, and any other future public sector power project, in AJK on a par with NHP paid to the provinces. Any future revision in the rate of NHP for provinces shall also apply to WUC for AJK. Also, the agreement required that WUC at the revised rate of Rs1.10/kWh shall be paid prospectively only, once the recovery through tariff begins after Nepra determination. The AJK would, however, not get any past claims.

“Given the above, Nepra has decided to apply the revised rate of WUC prospectively from the date of the amendment to Mangla Raising Agreement dated February 2022. Further, the authority has decided to apply the rate of Rs1.1/kWh with future indexations in line with NHP indexation”, said Nepra, adding that it has also allowed WUC arrears amounting to Rs354.04 million for the period between Oct 18, 2021 and May 26, 2022 for which no WUC rate for Mangla was mentioned in the determination.

In the meanwhile, the KP’s share on account of NHP also increased to Rs28.6bn for FY23 against Rs24.56bn in FY22 while Punjab’s share increased to Rs11.65bn for FY23 against Rs10.5bn in FY22. Total hydel levies including all three stakeholders – KP, AJK and Punjab — increased to Rs45.9bn for FY23 from Rs35.9bn in FY22.

Published in Dawn, September 8th, 2023