ISLAMABAD: The government has formally sought about a 25 per cent increase in the base national electricity tariff to become effective from July 1, 2025, to secure a revenue requirement of about Rs4 trillion in FY25 for power companies.

The National Electric Power Regulatory Authority (Nepra) has called a public hearing on May 23 to examine a petition filed by the Central Power Purchasing Agency (CPPA) of the Power Division on behalf of power companies seeking an increase of Rs4.40 to Rs6.51 per unit in the overall power purchase price (PPP) for FY25.

The CPPA, acting as a commercial agent of the power sector, has presented seven different scenarios for electricity to be sold during FY25. Under these estimates, 131,000 to 139,000 gigawatt hours (GwH) of electricity sales are expected next year, with demand growth ranging from 3pc to 5pc.

The minimum increase under one estimate works out to be Rs4.40 per unit in PPP and goes up to Rs6.50 per unit to Rs27.11 per unit. On average, the CPPA has sought an increase of Rs6.80 per unit in PPP or more than 25pc based on the annual revenue requirement of about Rs3.6tr or an average PPP rate of Rs32.75 per unit when compared to Rs26 per unit (Rs2.87tr) in the current year.

After additional distribution margins of about Rs385 billion for Discos and about Rs80bn of prior-year adjustments, the average sale rate for next year works out to be Rs37 per unit based on Rs4.07tr against Rs29.78 per unit or Rs3.3tr for the current year, representing an increase of 25pc.

The major increase of almost 50pc has been sought on account of energy purchase price (EPP), including variable operations and maintenance cost. The EPP for next fiscal year has been claimed to be Rs1.16tr to Rs1.26tr against Rs840.5bn in current year. Therefore, the per unit EPP works out to be Rs11.45 per unit next year against Rs7.63 during current year, showing an increase of Rs3.8 per unit.

Another 16pc increase has been projected in the capacity payment price (CPP) to Rs19.8 per unit from Rs17 per unit at present, up Rs2.8 per unit. This means the total capacity payments would get close to Rs2.2tr when compared to Rs1.87tr in current fiscal year.

In addition, about 66 paise per unit has been considered for transmission, use of service charge, market operation fee, and distribution margin etc.

For the current fiscal year, the base power purchase price approved by the Nepra stands at Rs20.60 per unit (kwh), resulting in base rate for Discos at Rs23 per unit and exceeds Rs29.78 per unit average sale rate for consumers, after inclusion of distribution margin for Discos. These numbers do not include taxes, surcharges and duties that later become part of the consumer tariff.

This is based on revenue requirements for individual distribution companies (Discos) already approved by the regulator in recent months and would become the base for a circular debt management plan to be approved by the International Monetary Fund as part of the next bailout package later this year.

The CPPA has claimed that the PPP forecast for FY25 had been finalised after consultation with multiple organisations including the Nepra itself, Power Division, K-Electric, National Power Control Cell (NPCC), Power Planning and Monitoring Company (PPMC), Pakistan LNG Limited and Discos to “ensure mutual consensus throughout the entire process”.

Furthermore, the data regarding the key assumptions set including electricity demand, fuel prices, hydrology, service charges, and economic parameters was sought from different sectoral entities and relevant platforms.

Published in Dawn, May 16th, 2024