Another Rs1.58 tariff hike on the cards
design: mohsin alam
Amidst protests against the inflated electricity bills, power consumers are bracing for another tariff increase of Rs1.58 per unit on account of fuel charges adjustment (FCA) for July 2023.
At a public hearing on Wednesday, the power-sector regulator and interveners raised serious questions over the inefficiency of electricity companies.
The hearing was informed that consumers were charged Rs1.81 per unit under June FCA whereas they would pay a somewhat lower FCA of Rs1.58 per unit for July.
The tariff hike will be Rs0.23 per unit less than that collected in the electricity bills of August on account of FCA for June. However, the overall increase will be more than that as the government also imposes sales tax on the fuel price adjustment. If the tariff increase is approved, the consumers will be burdened with a total cost of Rs22.73 billion.
Several previous adjustments worth Rs3.34 billion had been deferred because the regulator, the National Electric Power Regulatory Authority (Nepra), had yet to technically verify the numbers.
Earlier, the Central Power Purchasing Agency-Guarantee (CPPA-G) had sought a tariff hike of Rs2.06 per unit, which was revised to Rs1.579 per unit.
At the hearing, a shocking disclosure was that Nepra had set the reference tariff for Sahiwal coal-fired power plant at Rs16 per unit, but it claimed a price of Rs27 per unit.
CPPA-G officials contended that the Sahiwal plant management had imported coal at $400 per ton, which was not utilised owing to the possible violation of economic merit order. Government officials called for allowing the weighted average cost of coal so that the plant could be run to generate cheap electricity.
Nepra officials, however, pointed out that coal prices had come down to $100 per ton and regretted that the cheaper option was not being utilised whereas expensive electricity was being produced, which was putting a burden on the consumers.
“Why consumers should pay capacity charges,” the regulator asked. It was noted that the Sahiwal plant did not produce any electricity in April, generated just 3% electricity in May and 8% in June.
“What’s the mismanagement at coal-based plants where the base tariff is low but tariff claims are high,” the regulator remarked.
Two coal-based power plants had generation capacity of 3,900 megawatts but they supplied only 2,200MW, which was 1,700MW less than the actual capacity.
The regulator argued that the system could generate cheap electricity as conceived (coal-based electricity at base tariff of Rs16). The Sahiwal plant imported coal when prices were sharply higher at $400 per ton.
Responding to that, CPPA-G officials said that the plant was bound to maintain a 90-day inventory but it could keep only 45-day inventory when coal import cost reached $400 per ton.
Still, the plant could not use the coal stock due to high prices and the only solution was to fix the price in the weighted average format to clear the inventory, they said.
Nepra also took up for discussion the violation of economic merit order. Low electricity demand from distribution companies (DISCOs) was highlighted as well because it resulted in higher capacity payments.
The regulator noted that DISCOs were not presenting the accurate demand for electricity. Besides, there were issues of thermal constraints and transmission line failure as well.
The hearing was informed that thermal generation dropped when the Indus River System Authority (Irsa) slashed water releases abruptly.
“Without advance notice, Tarbela indent comes down,” an official said, adding that fuel availability was another challenge. “We don’t have frequency response from coal power plants,” a National Transmission and Despatch Company (NTDC) official said.
The hearing was told that consumers were compelled to pay a cost of Rs1.5 billion for system constraints.
Nepra officials asked NTDC about the delay in transmission lines for the evacuation of electricity.
It was noted that consumers had paid the investment cost for stabilising the grid as the country had been facing such issues since 2017.
Owing to the grid issues, the power plants producing expensive electricity were being run. Keeping that in view, Nepra sought a report on the investment made for grid stability.
The regulator also raised questions about the collapse of 138 towers of NTDC over the past five years. Replying to that, NTDC officials contended that Nepra had stopped the payment of Rs38 billion to the company.
“We requested again and again to allow the release of the amount, which constituted over 50% of our running business, but it was not allowed despite conducting an audit,” the NTDC managing director said.
He pointed out that they were working on 41 projects under the World Bank umbrella but the schemes were encountering challenges of cash flow and Letters of Credit (LCs) opening. In this regard, civil work has been done and land has been acquired.
Turning to power theft, the MD revealed that three gangs were involved in the theft of equipment from electricity towers in Jamshoro areas. FIRs have been lodged against them, but they are still at large.
Published in The Express Tribune, August 31st, 2023.
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