Approval sought for Rs3.39 power surcharge

The National Electric Power Regulatory Authority (Nepra) on Thursday raised questions over the imposition of power surcharges on consumers.

The regulator held a public hearing on the government’s petition to allow the imposition of an additional surcharge of Rs3.39/unit, transferring up to Rs14.23/unit staggered Fuel Charge Adjustments (FCAs) onto power consumers.

In two separate public hearings, Nepra said it is not clear whether the transfer of both the burdens is within their jurisdiction or not and have sought legal counsel on the matter. In the first hearing, the government sought the authority’s approval in allowing an additional surcharge of Rs3.39/unit on electricity consumers – a total impact of Rs76 billion from March-June 2023. The additional surcharge will cover the markup charges on the Pakistan Holding Limited (PHL) loans, not covered through the already applicable Financing Cost (FC) Surcharge of 0.43/kwh for FY 2022-23.

The Nepra officials, however, observed that Rs0.43/ unit is already being charged to consumers and now the government was looking to increase it to Rs3.82/unit.

The authority was informed that, after four months, the additional surcharge of Rs3.39/unit will be reduced to Rs1/unit, to cover the additional markup charges of PHL loans not covered through the already applicable Financing Cost (FC) surcharge @0.43/unit – taking the total surcharge to Rs1.43/unit for FY 2023-24. Levying the additional surcharge will enable the government to pay off Rs120 billion in interests on power holding company’s loans.

The authority’s approval has been sought for the incorporation of two surcharges i.e., Rs3.82/unit and Rs1.43/unit for four months of FY-23 and FY-24 respectively.

As of June 30, 2022, of the total outstanding finance facilities of Rs800.253b, the servicing of loans amounting to Rs246.384 billion is being managed by the imposition of an FC surcharge levied at Rs0.43/unit since March 22, 2018. This FC Surcharge, however, is not sufficient to cover the markup charges of all the PHL loans.

The mark up of the remaining loans is being paid from revenue collected through electricity sales.

Chairman NEPRA Tauseef Farooqi expressed strong reservations about the surcharge saying, “Due to the inefficacies of the power companies, power consumers are being burdened with high surcharges.” “We need the legal position of the government regarding the imposition of this surcharge,” said Farooqi, adding that, “Allowing recoveries in this way, will make other procedures redundant. If the government has the authority, then it should not shift the responsibility onto Nepra.”

“This situation did not emerge in one day. We had warned the government several times of deteriorating power management, but no heed was paid. This indicates the inefficiencies of the Power Division due to which every year the situation becomes from bad to worse,” said the Nepra chairman.