The National Electric Power Regulatory Authority (Nepra) is all set to allow an increase of Rs2.9 per unit in K-Electric’s tariff on account of fuel cost adjustment (FCA) for January 2022.
The prime minister’s relief package echoed in a public hearing of K-Electric’s petition for a tariff hike of Rs3.4 per unit under the monthly FCA.
The hearing was presided over by Nepra Chairman Tauseef H Farooqui, who said that Prime Minister Imran Khan had announced a relief of Rs5 per unit for electricity consumers but it was not yet clear how it would be implemented.
K-Electric envisioned a recovery of Rs3.04 billion from its consumers under FCA for January.
The Nepra chairman said that the regulator was examining the prime minister’s relief package and it would soon hold a meeting with the federal minister for energy for implementation of the package.
According to Farooqui, K-Electric’s gas challenges were likely to persist, hence the regulator had no option but to disallow the cost of expensive fuels. He said that after adjustment, K-Electric’s FCA had been worked out at about Rs2.9 per unit.
K-Electric had sought a tariff hike of about Rs3.4 per unit for the electricity it sold to consumers in January in a bid to generate Rs3 billion in additional revenue.
Representatives of K-Electric submitted that its FCA was on the higher side for January compared to the reference cost of Rs5.95 per unit cleared by the regulator on the request of Central Power Purchasing Agency (CPPA) for the month.
Moreover, the gas infrastructure development cess (GIDC) arrears amounting to Rs762 million per month were being billed by Sui Southern Gas Company (SSGC) as per Supreme Court’s order.
Nepra Vice Chairman Rafique Shaikh observed that if K-Electric was depending on CPPA, then its privatisation had borne no fruit.
K-Electric officials also said that gas supply to the utility was negligible because of shortage of domestic gas while SSGC had also been unable to address the issue of low gas pressure.
The Nepra chairman also questioned why K-Electric was not clearing Rs142 billion worth of payables to SSGC.
A K-Electric official said that the payables were disputed as a major portion of the amount was the mark-up. He stated that efforts were being made to settle the arrears with SSGC.
Under the tariff mechanism, the changes in fuel cost are passed on to consumers on a monthly basis through an automatic mechanism while the quarterly tariff adjustments on account of variation in power purchase price, capacity charges, variable operation and maintenance costs are added to the base tariff by the federal government.
Earlier, Nepra hinted at a tariff increase of around Rs5.95 per unit for power distribution companies on account of FCA for January 2022.
The increase in tariff is expected because in January the country produced electricity from expensive fuels like high-speed diesel (HSD), furnace oil and re-gasified liquefied natural gas (RLNG).
Earlier, the Central Power Purchasing Agency-Guarantee (CPPA-G) sought a tariff increase of Rs6.10 per unit from the reference fuel charges of Rs6.51 per unit. The actual cost of electricity went up to Rs12.61 per unit due to the use of expensive fuel in power plants.
On the international front, energy prices also went up because of the geopolitical situation in the Middle East and Ukraine.
The recent military conflict between Russia and Ukraine has fueled the increase in energy prices, signaling more increases in power tariff in the coming months.
To discuss the monthly FCA for distribution companies (DISCOs), Nepra recently held a public hearing, led by its Chairman Tauseef H Farooqi. It was also attended by senior members of the regulatory body.
CPPA-G submitted request for an increase of Rs6.10 per unit on account of FCA for January 2022.
However, according to preliminary examination of data by Nepra, the tariff increase was estimated at Rs5.95 per unit.
In January, electricity consumers were charged Rs3.10 per unit on account of FCA, which was only for one month.
“The authority will issue its detailed decision after further scrutiny of data,” Nepra said.
Published in The Express Tribune, March 2nd, 2022.
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