Consumers could be forced to repay loans of power firms
Govt likely to raise tariff to recover Rs260b worth of borrowing .
According to the Ministry of Water and Power, the sound financial health of power companies depends on transferring the full cost of supply to consumers through tariffs and recoveries. PHOTO: FILE
ISLAMABAD:
The government has decided to pass on the impact of over Rs260 billion worth of loans taken from banks by power distribution companies, to the consumers in an attempt to improve financial health of energy firms that have been blighted by electricity theft and lack of recoveries.
This move could lead to a sharp increase in power tariff in the next fiscal year, beginning July, officials say.
The principal amount of loans is Rs239 billion while mark-up stands at about Rs20 billion.
“The government has issued policy guidelines to the National Electric Power Regulatory Authority (Nepra), asking the regulator to pass the impact on to consumers in a review petition filed by distribution companies, which is yet to be decided by Nepra,” an official told The Express Tribune.
According to documents, the Ministry of Water and Power stressed in a meeting of the Economic Coordination Committee (ECC) on May 28 that sound financial health of power companies depended on the transfer of full cost of supply to end-consumers through tariff and recoveries.
The crisis emerged because of the lower cost charged from the consumers and less recoveries from federal government departments, provincial governments and private consumers, it said.
In a bid to clear liabilities of power generators, oil and gas suppliers and service providers, the distribution companies took loans amounting to Rs239 billion from a consortium of banks and other financial set-ups.
The ministry said mark-up cost or supplementary charges on loans were building up and had not been transferred to consumers either through monthly tariff revision or through notified tariffs. Simultaneously, heavy amounts were stuck with provincial governments, Azad Jammu and Kashmir, K-Electric, Federal Board of Revenue and private consumers.
The ECC was told that at present mark-up income and other income were being recognised by Nepra by reducing tariffs of distribution companies by an equal amount under Section 31(4) of Nepra Act 1997 and Tariff Standard and Procedure Rules 1998.
On the same principle, it suggested, the mark-up cost borne by the power sector should also be recognised and allowed in tariffs of distribution companies to keep uniformity in the system.
“It would be quite appropriate to allow debt servicing including principal amount and mark-up to be included in tariff in proportion to the loans taken by distribution companies,” the ministry said.
It suggested that to recover the cost of supply and avoid financial crisis, the ECC may consider including debt servicing in revenue requirements of distribution companies which would be adjusted in tariffs on an annual basis.
The ECC, after considering a summary sent by the ministry, approved issuance of guidelines on incorporating debt servicing into revenue requirements of distribution firms.
Despite repeated attempts, spokesperson of the Ministry of Water and Power could not be reached for comments.
Published in The Express Tribune, June 7th, 2014.
The government has decided to pass on the impact of over Rs260 billion worth of loans taken from banks by power distribution companies, to the consumers in an attempt to improve financial health of energy firms that have been blighted by electricity theft and lack of recoveries.
This move could lead to a sharp increase in power tariff in the next fiscal year, beginning July, officials say.
The principal amount of loans is Rs239 billion while mark-up stands at about Rs20 billion.
“The government has issued policy guidelines to the National Electric Power Regulatory Authority (Nepra), asking the regulator to pass the impact on to consumers in a review petition filed by distribution companies, which is yet to be decided by Nepra,” an official told The Express Tribune.
According to documents, the Ministry of Water and Power stressed in a meeting of the Economic Coordination Committee (ECC) on May 28 that sound financial health of power companies depended on the transfer of full cost of supply to end-consumers through tariff and recoveries.
The crisis emerged because of the lower cost charged from the consumers and less recoveries from federal government departments, provincial governments and private consumers, it said.
In a bid to clear liabilities of power generators, oil and gas suppliers and service providers, the distribution companies took loans amounting to Rs239 billion from a consortium of banks and other financial set-ups.
The ministry said mark-up cost or supplementary charges on loans were building up and had not been transferred to consumers either through monthly tariff revision or through notified tariffs. Simultaneously, heavy amounts were stuck with provincial governments, Azad Jammu and Kashmir, K-Electric, Federal Board of Revenue and private consumers.
The ECC was told that at present mark-up income and other income were being recognised by Nepra by reducing tariffs of distribution companies by an equal amount under Section 31(4) of Nepra Act 1997 and Tariff Standard and Procedure Rules 1998.
On the same principle, it suggested, the mark-up cost borne by the power sector should also be recognised and allowed in tariffs of distribution companies to keep uniformity in the system.
“It would be quite appropriate to allow debt servicing including principal amount and mark-up to be included in tariff in proportion to the loans taken by distribution companies,” the ministry said.
It suggested that to recover the cost of supply and avoid financial crisis, the ECC may consider including debt servicing in revenue requirements of distribution companies which would be adjusted in tariffs on an annual basis.
The ECC, after considering a summary sent by the ministry, approved issuance of guidelines on incorporating debt servicing into revenue requirements of distribution firms.
Despite repeated attempts, spokesperson of the Ministry of Water and Power could not be reached for comments.
Published in The Express Tribune, June 7th, 2014.