NEPRA likely to cut tariff by Rs2.78 per unit

CPPA submits petition to the regulator, seeks a cut in power tariff for March due to plunging oil prices

ISLAMABAD:

The National Electric Power Regulatory Authority (Nepra) is likely to cut power tariff by Rs2.78 per unit on account of fuel price adjustment for March 2016 following a dip in global crude oil prices.

The Central Power Purchasing Agency (CPPA), in a petition submitted to the regulator, sought a cut in the power tariff by Rs2.78 per unit for March due to plunging oil prices. The relevant amount will be credited to power consumers as refunds.



The CPPA had informed the regulator that 6.58 billion units were sold to the consumers in March, incurring a fuel cost of Rs34.96 billion, which translates into a Rs5.31 per unit fuel cost. However, the reference fuel price for billing the consumers was Rs8.09 per unit - Rs2.78 higher than the actual cost.

Earlier, the regulator had decided to cut the power tariff by Rs4.36 per unit on account of fuel adjustment for February 2016.

The Rs2.78 per unit refund will be passed to consumers using over 300 units per month since those using under 300 units already enjoy government subsidy. This would be in line with government’s commitment to several international lending agencies including the World Bank, IMF and ADB that it would eventually phase out untargeted subsidies, all the while protecting the most vulnerable consumers.



However, the refund will not apply to the agricultural sector and K-Electric consumers.



The timely summation of all the necessary information for fuel adjustment might have come as a result of the Rs1 million fine on the CPPA in February imposed by Nepra for failure to provide the relevant details in time.

Nepra would take the decision at the upcoming public hearing on monthly fuel adjustment mechanism. It has called all stakeholders to attend the hearing scheduled for April 26.

Nepra’s review

Nepra, while reviewing the petition submitted by the CPPA, deemed the cost of power generated to still be higher than what it ought to be. It expressed serious concern over violation of the merit order following shocking revelation that power plants were being run on expensive fuel, foregoing the cheaper options, which burdened the consumers and deprived them of the much-needed relief.

In the past, gas has been the cheaper source of power generation but according to calculations submitted by the CPPA, gas-based power cost Rs5.86 per unit, which is more expensive than the furnace-based generation cost of Rs5.13 per unit.

Nepra further noted that power plants were not operating at full capacity that led to outages despite the dip in global crude prices.

Last hearing

During the public hearing conducted for the month of February, Nepra had noted that despite load-shedding across the country, plants that could generate cheaper power were not being run.



Nepra member Khawaja Naeem said the CPPA and the National Transmission and Dispatch Company (NTDC) were involved in criminal acts by favouring some elements that were responsible for generating expensive electricity.



He said electricity could be made cheaper by Rs5.50 per unit. Power plants generating power at the rate of Rs4.50 per unit were run only partially, he added.

Published in The Express Tribune, April 22^nd,  2016.

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