Despite a substantial reduction of 10% in the cost of fuel for power generation in May 2024, the electricity distribution companies (DISCOs) demanded a tariff increase of Rs3.41 per unit in the name of fuel charges adjustment (FCA).
Higher capacity charges will also weigh on the final electricity tariff for the month.
Electricity supplying companies have sought an upward revision in fuel charges owing to a lower reference fuel cost. Similarly, capacity payments have surged due to a drop in demand for power consumption compared to the earlier demand projection.
Meanwhile, the power sector registered the first increase in production in seven months in May 2024, up 3% to 12,617 gigawatt hours (GWh) compared to the same month of last year.
Month-on-month, electricity generation climbed 46%, driven by increased household demand amid sweltering heat, acceleration in industrial activities and better production by hydroelectric power plants.
Topline Research reported that fuel cost went down 10% year-on-year and 5% month-on-month to Rs8.7 per unit in May 2024 “due to higher hydel generation having zero fuel cost”.
Cumulatively, in the first 11 months (July-May) of fiscal year 2023-24, the fuel cost fell 5% to Rs8.8/unit.
However, the fuel cost remained higher than the reference cost of Rs5.71 per kilowatt-hour (kWh) in May. “Consequently, DISCOs sought an FCA of Rs3.41/kWh (which may appear in July),” Optimus Capital Management Head of Research Maaz Azam reported while citing a notification of the National Electric Power Regulatory Authority (Nepra).
The authority is scheduled to hold a public hearing on DISCOs’ demand for FCA on June 28, 2024.
During May 2024, the actual power generation was 11.3% lower than the projected production. “This decline in generation is expected to result in higher capacity charges for the QTA (quarterly tariff adjustment) for the second quarter of fiscal year 2025,” Arif Habib Limited Head of Research Tahir Abbas said in a commentary.
Optimus Capital’s Azam said that power production rose to 12,617 GWh in May 2024 (compared to 12,284 GWh in May 2023), the first year-on-year increase after September 2023.
The increase was attributed to higher output from hydel plants (3,906 GWh in May 2024 compared to 3,312 GWh in May 2023), particularly the rise in production from Tarbela, and increased output from nuclear power plants (2,360 GWh in May 2024 compared to 1,543 GWh in May 2023), as K-3 had not been utilised in May last year.
He projected that in June 2024 power generation was expected to go up in the wake of higher seasonal demand.
Additionally, “we foresee a rise in fuel costs following reports that the Neelum Jhelum hydropower plant will stay off the grid for another 18 to 24 months, as the issue with the headrace tunnel pressure appears to be more significant than initially anticipated.”
He reported that a Chinese coal-fired power plant (CPHGC) finally resumed operation after standing idle for five months. It had last produced electricity in November 2023 while in May 2024 CPHGC’s utilisation stood at 9%.
In addition, furnace oil-based plants were utilised after a gap of four months on the back of higher demand in the summer season. Furnace oil plants were last utilised in January 2024, he said.
In May 2024, the furnace oil-based utilisation rates for Nishat Power, Kohinoor Energy and Nishat Chunian Power rose to 29%, 18% and 2%, respectively, resulting in increased fuel savings.
Pakgen Power and Lalpir Power generated no units of electricity, thus pushing down fuel losses. Likewise, NEL and Hub base plants also remained unutilised.
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