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Electricity bills to surge with record fuel cost adjustment
ISLAMABAD: In yet another blow to struggling electricity consumers, the Central Power Purchasing Agency (CPPA) has sought a massive Rs7.13 per unit increase in fuel charges in the upcoming bills on account of electricity consumed in January to generate an additional Rs57 billion for power distribution companies (Discos) formerly under Wapda.
This is the highest-ever increase in fuel cost adjustment (FCA) demanded by the CPPA in history — almost 96pc higher than the pre-fixed fuel cost of Rs7.50 per unit already charged to consumers in January — and calls into question the capabilities of the power sector bureaucracy to forecast fuel costs even for six to seven months.
This increase in FCA is on top of about 26pc increase in the annual base tariff and another 18pc hike under the quarterly tariff adjustment currently in place. As a result, consumers will have to pay excessive bills despite minimum consumption in peak winter months. The National Electric Power Regulatory Authority (Nepra) has accepted the request for a public hearing on Feb 23 (Friday).
The higher proposed FCA on the consumption of January 2024 is mainly because of higher domestic coal and gas prices, although imported fuel prices, including furnace oil and LNG, were lower in January, and the exchange rate remained stable.
CPPA seeks unprecedented Rs7.13 per unit FCA in March bills to generate Rs57bn for Discos
In a petition, the CPPA, acting as a commercial agent of Discos, demanded an additional FCA of Rs7.1308 per unit in the billing month of March for electricity consumed in January. It claimed that the reference fuel cost for January was set at Rs7.489 per unit, but the actual fuel cost came in at Rs14.62 per unit.
It said that about 8,314 gigawatt-hours (GWh) of electricity was generated at an estimated fuel expenditure of Rs114.6bn (or Rs13.79 per unit) in January, of which 7,938 GWh was delivered to Discos at a cost of Rs116.059bn (Rs14.62 per unit).
This included a hydropower share of just 11pc in January compared to 24pc in December 2023 and 36.5pc in November. Hydropower, which has no fuel cost, is always lower in January than in other months because of canal closure for annual maintenance.
The biggest share in the national grind came from nuclear power at about 21pc in January compared to 19pc in December and 21pc in November. The second-largest share, 18.22pc, came from imported liquefied natural gas (LNG) in January, against 16.4pc in December and 10.6pc in November.
The third-largest share (16.5pc) was of local coal in January compared to 17pc in December; with the addition of about 7pc share of imported coal, the overall coal generation accounted for 23.4pc in January, higher than 22pc of total power production in December. Then followed the domestic gas-fired electricity with 12.45pc share in January, up from 10.7pc in December and 9.2pc in November.
The fuel cost of furnace oil-based power generation reduced to Rs35.4 per unit in January when compared to Rs38.5 per unit in December and Rs47 per unit in November. The furnace oil-based generation in January went up to 9pc from 2.2pc in December because of lower hydropower availability.
Diesel-based generation cost went up slightly to Rs45.6 per unit compared to Rs42 in December, and its total share also increased to 1.22pc in January compared to a negligible 0.08pc in December.
The LNG-based power generation cost in January declined to Rs24.3 per unit compared to Rs26.22 in December. On the other hand, the cost of domestic gas-based generation was slightly lower at Rs13.7 per unit compared to Rs14.6 in December, mainly because of increased production.
The cost of local coal-based generation in January amounted to Rs11.9 per unit compared to Rs12.33 in December and Rs15.3 in November. The cost of power generated from imported coal went up to Rs21 per unit against Rs17.25 in December and Rs14.53 in November.
Three renewable energy sources — wind, bagasse and solar — together contributed 3.4pc power to the grid in January, down from 4pc in December. Wind and solar have no fuel cost, while bagasse-based generation cost remained unchanged at about Rs6 per unit.
After approval by Nepra, the increase in FCAs would be adjusted in consumers’ bills in the upcoming billing month of March. The FCA is reviewed every month as per the tariff regime applicable across the country and is usually applicable to the consumer’s bills for one month only.
On approval, the higher FCA would apply to all consumer categories except lifeline power consumers and protected domestic consumers using up to 300 units, and agricultural consumers and electric vehicle charging stations .
The adjustment would also apply to domestic consumers having time-of-use meters irrespective of their consumption level.
Under the tariff mechanism, changes in fuel cost are passed on to consumers only on a monthly basis through an automatic mechanism, while quarterly tariff adjustments on account of variation in power purchase price, capacity charges, variable operation and maintenance costs, use of system charges and including impact of transmission and distribution losses are built in the base tariff by the federal government.
Published in Dawn, February 21st, 2024
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