NEPRA’s authority to collect fuel adjustment charges declared ‘illegal’

The Lahore High Court (LHC) on Monday declared the fuel price adjustment (FPA) in electricity bills as illegal, observing the demand of FPA, quarter tariff adjustment and change of status of tariff from industrial to commercial by the NEPRA not constituted fully under section 3 of the NEPRA Act, 1997.

LHC Judge Justice Ali Baqar Najafi issued an 81-page verdict that had been reserved on October 10, 2022 and disposed of more than 3,000 petitions challenging the authority’s mandate.

Justice Najafi directed the respondent NEPRA not to charge any exorbitant tariff beyond the paying capacity of the domestic consumers.

In the judgement, Justice Najafi further directed the NEPRA to provide maximum subsidy to the domestic consumers consuming up to 500 units per month.

“Fix the responsibility of over-charging on the basis of line losses and the less efficient power plants and the financial burden will also be shared by the companies under a rational proportion,” read the judgement.

It advised against demanding extraordinary taxes having no nexus with the consumption of energy which may be recovered through other modes.

The judgement directed the power regulatory authority to inform the consumers about the charges on monthly basis and the fuel price adjustment within seven days.

“The quarter tariff adjustment shall not go beyond the statutory period.”

The NEPRA was also ordered to explore the cheap modes of producing electricity and evolve mechanisms for its quick availability.

It further directed to ensure the smooth supply of electricity based on demand and not to unilaterally change the type of tariff for industrial to commercial consumers without hearing such consumers.

Also read: Reply sought on fuel price adjustment pleas

“Further explore the Solar, Hydal, Nuclear and Wind sources of producing electricity. Arrange for cheap purchase of sources of electricity from other countries,” the verdict added.

The petitioners (domestic, industrial and commercial consumers) had challenged the imposition of fuel price adjustment, quarter tariff adjustment and change of tariff from industrial to commercial.

They sought direction to the NEPRA and distributing companies not to charge them illegally in violation of “Article 4, 9 & 38 of the Constitution of Islamic Republic of Pakistan, 1973”.

Petitioner’s counsel advocate Azhar Sidduque implored the court that the decision made by the authority was oblivious to certain facts and as such it did not protect the interest of consumers, therefore, obviously, the petitioners have the legitimate expectation not to pay the additional surcharges etc. which were not previously demanded from them at such a high rate.

Other counsels argued that that the decisions taken by the NEPRA for tariff determination are without the full strength as mandated under Section 3 of NEPRA Act, 1997 since out of four only two members are functional along with the chairman.

Notwithstanding the availability of quorum, the authority was not legally constituted, therefore, it did not have the full power to decide.

NEPEA’s counsel argued that the fuel price adjustment variation is not a new phenomenon. However, during the last one year because of the unprecedented hikes in the fuel prices, the prices of different fuel sources almost jumped three times owing to the increase in international prices and the devaluation of Pakistani rupee. “The price of the imported fuels is dependent on global fuel price hike increasing the cost of generation which obviously had resulted into unparalleled monthly fuel cost adjustment (FCA) and had a great impact to the end-consumers.”

The government had given the relief against fuel price adjustment (FPA) at the rate of 5/kwh on fuel cost adjustment for a period of four months from March, 2022 to June, 2022 and the subsidies amounted to around Rs126 billion, the NEPRA counsel added.

He argued that the authority is functioning properly and has completed the due process.