Relief in offing for KE, DISCOs consumers

Nepra allows govt to divert Rs58b funds to provide Rs1.71/unit relief to power consumers

ISLAMABAD:

The National Electric Power Regulatory Authority (Nepra) has allowed the federal government to divert Rs58 billion funds collected from the oil consumers to provide relief of Rs1.71 per unit rate to consumers of distribution companies (DISCOs) and K-Electric.

According to the Power Division, the federal government had allocated around Rs266 billion subsidies for FY 2024-25, which, after inclusion of the currently proposed relief of Rs58.6 billion at Rs1.71/kWh, would total Rs325 billion.

The government will collect Rs58 billion on account of petroleum development levy (PDL) from the oil consumers which will be redirected to offer relief to electricity consumers. The relief will be applicable from April 2025 to June 2025.

In a decision issued on Thursday, Nepra said it had carefully considered the submissions made by the federal government in the motion and during the hearing, as well as comments from stakeholders.

It noted that the Ministry of Energy had not requested any change in Nepra's tariff or the revenue requirement of DISCOs.

Rather, it has decided to use the PDL to provide an additional subsidy to electricity consumers of DISCOs and K-Electric, excluding lifeline consumers. Furthermore, no objection was raised by any stakeholder.

In view thereof, the power regulator said it has no objection to the instant motion, as it does not impact Nepra's determined tariff.

Accordingly, the power regulator approved the request of the ministry to provide an additional subsidy of Rs1.71/kWh.

While responding to other queries raised by a Mr Bilvani, the Ministry of Energy explained that the expected PDL collection for FY 2025-26 would be considered at the time of annual rebasing of tariff for FY 2025-26, after approval of the Cabinet.

On the point of subsidy, the ministry said the federal government allocated around Rs266 billion for FY 2024-25, which, after inclusion of the currently proposed relief of Rs58.6 billion at Rs.1.71/kWh, would total Rs325 billion.

A representative of CPPA-G said that category-wise relief would vary depending on applicable taxes for the relevant category. Upon inquiry from Mr Abubakar Ismail, the ministry clarified that the relief of Rs1.71/kWh shall be applicable to all consumers of DISCOs and K-Electric, except lifeline consumers.

While responding to the query of Mr Hannan regarding the B-4 tariff, the energy ministry explained that the existing peak rate for the B-4 category is Rs.40.76/kWh, which after reduction would become Rs.34.78/kWh. Similarly, the B-4 off-peak rate is Rs.36.38/kWh, which would reduce to Rs.30.40/kWh.

Mr Raza raised concerns about the burden being placed on grid-connected consumers due to the increasing number of net-metering connections. It was explained that the government is actively deliberating on the matter, and the issue may be discussed during the upcoming tariff rebasing.

An intervener inquired about the total volume of circular debt, to which the ministry responded that it stands at Rs.2.4 trillion. Mr Rahat Gul requested addressing structural issues in billing, such as the removal of the financing cost surcharge, instead of providing relief in the tariff.

Mr Muhammad Asif requested the rationalization of fixed charges.

Another intervener inquired about the breakdown of the relief announced by the prime minister and the period to which this relief shall apply, which was accordingly explained by the Ministry of Energy.

While responding to the query regarding the continuation of relief going forward, the ministry said a major portion of the power sector cost is dependent on macroeconomic conditions such as international fuel prices and exchange rate parity. Therefore, any such relief would be dependent on macroeconomic stability.