Power tariff may hit consumer’s pockets in FY 2024-25

Base tariff of electricity likely to go up to Rs5 per unit

Zafar Bhutta May 16, 2024


Consumers may be in for another financial jolt as the base tariff of electricity is likely to go up to Rs5 per unit for the fiscal year 2024-25.

Central Power Purchasing Agency (CPPA) has submitted the projected power purchase for the Financial Year (FY) 2024-25.

In its petition, submitted on behalf of DISCOs, the total power purchase price for the next fiscal has been projected to be up Rs3.58 trillion, which is approximately Rs310 billion higher than the existing PPP cost of Rs3.28 trillion.

CPPA-G has presented the Projected Power Purchase Price report for FY 2024-25, outlining seven scenarios for the Authority's consideration, aimed at determining the tariff at the consumer end for the fiscal year 2024-25.

The scenarios revolve around different levels of demand growth (ranging from 3% to 5%), exchange rates (with the rupee valued at 275 and 300), and hydrological conditions during normal and dry seasons.

The CPPA projection suggests that electricity consumers will bear 2.40% of the US inflation, which is proposed to be incorporated into the tariff, 12.20% of domestic inflation, an interest charge of 21.37% and 5.31%, on electricity purchases, and market operator fee of Rs3.48 per unit.

Similarly, fuel costs ranging from Rs8.61 per unit to Rs9.34 per unit have been proposed under various scenarios. Additionally, capacity charges are projected to range from Rs15.49 per unit to Rs17.42 per unit for 2024-25.

It's worth mentioning here that during the ongoing fiscal year, capacity payments accounted for 71% of the power purchase price (PPP), while energy costs constituted approximately 29% of the total projected PPP.

For 2023-24, the capacity charges were Rs16.22 per unit, whereas energy charges were Rs6.73 per unit.
The total power purchase price under seven scenarios has been projected to range from Rs25.03 per unit to Rs27.11 per unit for the next fiscal year.

Notably, the PPP for the ongoing FY 2023-24 is Rs22.95 per unit.

The capacity charges constitute approximately 64% of the total projected PPP of XWDISCOs, while energy costs make up around 34% of the total projected PPP.

Due to variable O&M costs, the CPPA has projected Rs0.48 per unit and Rs0.50 per unit under seven different scenarios.

The increase in PPP has been projected to range from Rs2.07 per unit to Rs4.16 per unit under various scenarios.
In addition to the PPP, the base tariff also includes the distribution margin for XWDiscos, as well as transmission and distribution losses.

The distribution margins of XWDiscos for the ongoing fiscal year is Rs3.10 per unit which is also likely to go up by 15 to 20%.

To ensure a fair and informed decision, NEPRA has scheduled a hearing for May 23, 2024.

However, if approved, consumers of DISCOs could face a staggering additional financial strain of Rs337 billion to Rs358 billion in the upcoming fiscal year (2024-25).

The current base price of electricity is around Rs30 per unit.


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