Power consumers brace for tariff surge
In the future, if the government delays subsidy payments, the company can make adjustments after two months against its payments to the government on account of power purchases. photo: file
Power consumers should brace themselves for another massive hike in electricity tariffs as six power utilities—DISCOs—have sought a revenue requirement of Rs967 billion on account of the indexation of tariff components and other costs for the year 2024-25.
Indexation of tariff components refers to the practice of adjusting or linking various components of a tariff—such as prices, fees, or charges—to an index or benchmark. This index could be based on factors like inflation rates, cost of living adjustments, or changes in market conditions.
The purpose of indexation is to ensure that tariffs remain aligned with prevailing economic conditions and to provide a mechanism for periodic adjustments to reflect changes in the underlying factors affecting costs or prices.
In separate multi-year tariff petitions submitted to the National Electric Power Regulatory Authority (Nepra), these DISCOs have sought revenue requirements.
Nepra—the power regulator—has already determined tariffs for these DISCOs under the Multi-Year Tariff (MYT) regime for a period of five years—from FY 2020-21 to FY 2024-25.
The MYT regime is a regulatory framework used in the energy sector, particularly in electricity distribution, to set tariffs for a period spanning multiple years, typically ranging from three to five years.
Under the MYT regime, instead of setting tariffs annually, regulatory authorities establish tariffs for a defined period based on factors such as projected costs, investments, and revenue requirements.
Now, in line with the adjustment mechanism provided in its notified MYT determination, the Consumer End Tariff Methodology (Guidelines), 2015, and the amended Nepra Act, the DISCOs have filed requests for indexation of different components of their revenue requirement for FY 2024-25.
In its petition, Gepco has sought a total revenue requirement of Rs376.2 billion, which includes Rs15.5 billion for salaries, Rs13.1 billion for post-retirement benefits, Rs47.8 billion gross margins, Rs43 billion as net margins, and Rs19 billion as a prior-year adjustment.
Mepco has sought a revenue requirement of Rs160 billion for the indexation of tariff components and other costs for the year 2023-24. It has sought an amount of Rs20.9 billion for pay and allowances, Rs24 billion for post-retirement benefits, Rs78.3 billion for gross margin, and Rs72 billion on account of net margins.
Qesco has sought Rs236 billion in revenue requirements, which include Rs9.1 billion for pay and allowances, Rs2.68 billion for post-retirement benefits, Rs31.8 billion for gross margin, and Rs29 billion on account of net margins. Rs13.9 billion has been sought on account of a prior-year adjustment.
Tesco has sought a revenue requirement of Rs92 billion. It wants Rs1.47 billion for pay and allowances, Rs565 million for post-retirement benefits, Rs6.8 billion for gross margin, and Rs6.30 billion on account of net margins. Rs941 million and Rs8.17 billion are sought respectively as wheeling charges and a prior-year adjustment.
Pesco has sought Rs67.2 billion in revenue requirements, including Rs18.8 billion for pay and allowances, Rs14 billion for post-retirement benefits, Rs57.7 billion for gross margin, and Rs52.6 billion on account of net margins. Rs10.6 billion has been sought on account of a prior-year adjustment.
Sepco seeks a revenue requirement of Rs35.7 billion, including Rs20.6 billion for operation and maintenance costs, Rs1.8 billion for depreciation costs, Rs28.9 billion for gross margin, Rs26.5 billion on account of net margins, and Rs9.2 billion on account of a prior-year adjustment.
The DISCOs have approached Nepra to allow an increase in electricity rates to recover billions of rupees from consumers. The power regulator will hold a public hearing on these petitions on April 2