Rs3.55 power tariff hike on the anvil

The government has proposed to the National Electric Power Regulatory Authority (Nepra) a potential increase of Rs3.55 per unit in power tariff, with an aim of recouping the elevated amount within a span of six months.

This measure seeks to prevent a decline in the collection of electricity bills. Previously, the Central Power Purchasing Company (CPPA)-G had requested an increment of Rs5.40 per unit, accompanied by a three-month recovery period.

A public hearing organised by the power regulator was told that the industrial consumers had shut down their businesses due to massive increase in the electricity rates, and therefore, the demand of ex-Wapda distribution companies (Discos) had witnessed a substantial decline.

The government was concerned that consumers would not pay bills if the hike of Rs5.40 per unit was passed on to them.

During the public hearing, the Power Division officials informed the regulator that consumers had refused to pay electricity bills last year following a massive hike in the power tariff.

In order to avoid such a situation, they requested the power regulator to recover the hike in bills in six months instead of three months.

Secondly, they maintained that the move would not result in a low recovery of electricity bills.

According to the petition, the CPPA-G had sought an increase in the electricity rates by Rs5.40 per unit on account of quarterly adjustments of Discos for variation in Power Purchase Price (PPP) for the fourth quarter of fiscal year 2022-23.

The major recovery to be made was of the capacity payments amounting to Rs145 billion from the consumers who had been paying bills regularly.

The amount would be paid to the power plants that remained idle and did not operate.

During the public hearing, the CPPA-G officials noted that Nepra had been allowing the recovery of hike in electricity rates from 12 to 15 months, adding that the regulator should allow the recovery of power tariff in six months’ time.

They said it would also result in an increase in the electricity rates by Rs3.55 per unit instead of Rs5.40 per unit due to low consumption of power during the winter season.

“The electricity bills are normally low during the winter season and therefore, the consumers will not feel shocks in electricity bills,” the officials said.

They observed that consumers were already paying Rs1.24 per unit increase in the electricity rates on account of quarterly adjustment that would end in September.

The officials suggested to recover Rs1.24 per unit from September and Rs2.31 per unit increase starting from October, noting that it would have less impact in the electricity bills for the consumers.

The public hearing was further informed that Discos had billed five billion units less to the consumers, indicating that demand during the period under review had been reduced.

It was said that two factors – weather and closure of industries due to hike in power rates – had impacted the electricity demand.

The power regulator expressed serious concerns over the inability of the Discos CEOs to explain about the low utilisation of the electricity.

The gathering was further told that each Disco was drawing 600MW to 700MW less electricity from the system due to low demand.

Meanwhile, 350,000 cases of connections are pending. The regulator observed that growth projection was not realistic.

It was informed that growth projection was based on last year’s data when the mercury soared to an unbearable level. However, Nepra sought explanation for low sale of electricity during the period under review.

The power regulator also noted with concern that the sale of Gepco had decreased despite having a steel melting industry. The sale of Lesco also dipped by 14 per cent which also had a steel melting industry.

The Faisalabad company was also impacted despite having industrial units. However, the CPPA-G officials maintained that the number of industrial consumers had closed at 373,000 in July as compared to 367,000 earlier.
“We can’t blindly stand the numbers you are showing,” Nepra officials said.

The power regulator also raised concerns over the recovery of hike in electricity bills during the six months’ period, noting that such a situation would impact the cash flow of Discos and add to the circular debt.
It said the dollar had been indexed at Rs286.

“It does not mean that inefficiency, overbilling, and cost of bad governance is passed on to the consumers,” the power regulator observed.

Nepra officials said that provincialisation of Discos was not a solution, adding that the power sector required structural changes to bring improvement.