NEPRA reserves decision on Rs19 tariff hike request

Industrialist insists massive fuel cost adjustment should be spread over nine months

ISLAMABAD:

The National Electric Power Regulatory Authority (Nepra) on Thursday reserved its judgement on an increase of up to Rs19 per unit in electricity tariff on account of fuel cost adjustment (FCA) for a nine-month period.

K-Electric (KE) had filed an application with the regulator, seeking a tariff hike of up to Rs18.86 per unit for the period spanning nine months from July 2023 to March 2024.

The proposed FCA could have an average impact of Rs1.6 to Rs2 per month on consumers compared to the average FCA of Rs2.89 per unit applied to the consumers of other power distribution companies (DISCOs) during the same time frame.

However, Nepra will make a final decision on the tariff increase and duration of the provisional FCA. KE submitted a provisional FCA petition based on three scenarios, seeking the regulatory authority’s approval for any of them.

Nepra will establish guidelines to determine the unit cost and recovery period of the FCA and will subsequently issue a notification while identifying the chosen method and its implications for consumer bills. This provisional request stems from ongoing deliberations between KE and Nepra on utility tariffs while feedback from stakeholders has already been solicited on KE’s distribution and supply tariff.

During an interactive hearing, the customers, including those who were present and the ones participating online, posed questions about various aspects of the provisional FCA. Responding to queries about integrating more cost-effective generation sources, the KE chief executive officer outlined plans to incorporate 640 megawatts of affordable wind and solar energy by fast-tracking such projects for commissioning within the next two years.

Additionally, he told the audience that efforts were underway to introduce cheaper indigenous fuel sources to further reduce the overall cost. Regarding electricity supply to the matric examination centres in Karachi, a spokesperson for the private power utility, when contacted, said the areas where exemption was possible for the examination centres, shared by the education department, they had been exempted from load-shedding for the duration of exams.

When asked about the reduction in KE losses since its privatisation, as pointed out at the hearing by Karachi industrialist Arif Bilwani, the information provided by the company indicated a significant decrease in losses from nearly 40% at the time of sell-off to approximately 15% at present. Nepra intervened when accusations beyond the scope of the hearing were made by Jamaat-e-Islami representative Imran Shahid. The party official rejected outright the increase in tariff.

He alleged that KE totally depended on the independent power producers (IPPs) and National Transmission and Despatch Company (NTDC), adding that citizens of Karachi were suffering electricity outages for three to 18 hours. “People of Karachi should not be punished for the inefficiency of the power sector,” he remarked.

While floating suggestions, Rehan Jawed, an industrialist from Karachi, proposed that FCA collection should be spread over a period of nine months.

FCA is a routine procedure for power utilities, which reflects changes in the generation mix and global prices of fuel used for electricity production.

Final determination of the FCA is made and notified by Nepra, preventing individual power distribution companies from unilaterally determining or modifying the FCA. “K-Electric has won an injunction against the refund of money to the customers of Karachi,” said Tanveer Bari, a representative of the Karachi Chamber of Commerce and Industry.

“Unless the fuel price adjustment is approved, the citizens of Karachi should get relief,” Bari stressed. It was emphasised at the hearing that load-shedding should not be done on the basis of feeder losses in Karachi. Industrialists pointed out that there were 4,000 units in Karachi which were facing a higher cost of electricity due to the application of cross-subsidy.

They were of the view that the incentive of incremental revenue was not being passed on to consumers despite a scheme announced in this respect by the federal government. They sought intervention of the power-sector regulator.

Karachi industrialists cautioned that industrial units were being shut down due to high electricity rates and asked the regulator to pass on the tariff hike in phases over a period of nine months to ease burden on the industry.

Published in The Express Tribune, May 10^th, 2024.

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