Consumers set to pay Rs8.7b for idle IPPs

The National Electric Power Regulatory Authority (Nepra) is likely to impose an additional burden of Rs8.7 billion on power consumers, primarily to compensate those Independent Power Plants (IPPs) that remained idle and did not generate a single unit of electricity.

The government recently terminated contracts with some IPPs to avoid capacity payments. Discussions are ongoing with another 18 IPPs, and it may take up to six months to finalize a revised deal to end these payments.

Currently, consumers are paying 70 per cent of their total bills as capacity charges, amounting to Rs17 per unit. Interestingly, the energy cost for generation is only Rs9.25 per unit.

The power distribution companies (Discos) have submitted their requests for adjustments for the first quarter of financial year 2024-25 (July to Sept 2024), in accordance with the notified mechanism.

The power regulator will conduct public hearing on Nov 20.

The Discos have requested Nepra to approve a power price hike, which, if approved, would impose an additional burden of Rs8.71 billion on electricity consumers nationwide.

This request submitted with Nepra by Faisalabad Electric Supply Company (Fesco), Gujranwala Electric Power Company (Gepco), Islamabad Electric Supply Company (Iesco), Lahore Electric Supply Company (Lesco), Multan Electric Power Company (Mepco), Peshawar Electric Supply Company (Pesco), Quetta Electric Supply Company (Qesco), Sukkur Electric Supply Company (Sepco), and Tribal Areas Electricity Supply Company (Tesco), related to the first quarterly adjustment of the current fiscal year, is set for hearing on Nov 20.

According to the details, the Discos' proposal includes various charges to cover operational and maintenance costs. Nepra documents outline the key areas for which additional funds are being requested, specifying Rs8.06 billion for capacity charges to compensate power plants for maintaining availability, even when not actively generating electricity.

An additional Rs1.25 billion is requested for operations and maintenance costs, which are essential for infrastructure upkeep, network reliability, and overall system maintenance.

The proposal also includes Rs1.65 billion for system charges and market operations fees (UoSC &MoF). These cover the costs associated with the operation of the grid system and market activities, including administrative and logistical expenses required to keep the power supply chain functional. Together, these costs contribute to the overall financial requirements for maintaining grid stability and supporting the operations of the power distribution companies.

Interestingly, the documents also mention a saving of approximately Rs2.25 billion, achieved through reduced transmission and distribution losses. This saving, resulting from improved efficiency in the power network, represents an effort to counterbalance some of the increased costs and reduce the total burden on consumers.

The Nepra hearing, scheduled for Nov 20, will review the distribution companies' request in detail. If approved, the increase will not only impact customers across the country but also extend to consumers of K-Electric, who will experience a similar adjustment in their bills. This adjustment, if enacted, could affect household budgets nationwide as it directly translates into higher monthly bills for electricity users.

In accordance with the notified tariff, the Discos have submitted requests for adjustments covering capacity charges, transmission charges, market operator fees, the impact of incremental units, the effect of T&D losses on FCA, and variable operations and maintenance charges for the first quarter of FY 2024-25 (July to Sept 2024), as outlined in the notified mechanism.