Bowing to govt pressure: Nepra approves Rs4 surcharge on power tariff

In addition to surcharges, Nepra approves a cut of Rs2.50 per unit subsidy for power consumers

ISLAMABAD: National Electric Power Regulatory Authority (Nepra) bowed down to federal government pressure on Wednesday depriving consumers of a reduction in electricity price by imposing a surcharge of up to Rs4 per unit on power consumers.

In addition to surcharges, the regulator has approved a cut of Rs2.50 per unit subsidy for power consumers.

Nepra has imposed Rs3 per unit surcharge on domestic power consumers whereas Rs4 per unit has been imposed on commercial and industrial consumers.

Read: Electricity costs: Tariff surcharges imposed despite Nepra objections

The regulator has sent the decision to the federal government for notification. The decision follows a cut in subsidy for power consumers in the Budget 2015-16 announced last week.

Following this decision, the regulator has deprived consumers of relief worth Rs90 billion. Consumers were supposed to enjoy a cut  in electricity prices by Rs1 to Rs4 per unit depending on different category of consumers.

The current power tariff has been maintained by imposing surcharges. Nepra has taken the decision despite the fact it is bound to pass on impact of cut in electricity prices to power consumers.

Read: Energy costs: NEPRA allows Rs2.05 drop in electricity tariffs … for now

According to officials, federal government is required to make an amendment in Nepra act to bar the regulator from taking decisions which pass on the impact of reduction in power price to consumers.

However, without making any such arrangement, the regulator succumbed to federal government’s pressure and imposed surcharges on power consumers to deprive them of relief to consumers in electricity bills.

Following pressure from International Monetary Fund (IMF), ministries of finance and power pressed Nepra to impose a surcharge on power consumers to absorb the impact of reduction in electricity prices.

Read: Clearing account: Sindh to comply with NEPRA tariffs

According to the decision, the federal government had submitted a review petition in the regulator to review the decision of financial year 2014-15 to impose surcharges and cut in subsidy to adjust the impact of reduction in electricity price. Now, the regulator has made surcharges part of tariff schedule which means that consumers would be paying surcharges on permanent basis.

Nepra had cut power tariff by Rs1 to Rs4 per unit for the year 2014-15 for the consumers of different power distribution companies (Discos). However, Nepra had issued a decision to imposes surcharges and cut of subsidy by Rs 2.50 per unit.

Faced with rising financial pressures from the badly run state-owned energy sector, the government had tried to push the power regulator to raise the allowable losses from theft and inefficiency from 12.5% of the total power produced by the grid to 15.5%, which would still be below the 19% actual loss levels. After Nepra refused to comply with the government’s demands, the Economic Coordination Committee had made the decision to extract the additional revenues through the imposition of the surcharges.

Now, the regulator which had been reluctant to follow policy guidelines of the federal government earlier to allow increase in benchmark of power theft and losses, had now approved surcharges to bail out inefficient power sector.