Fruits of cheaper oil: Major tariff cut expected, relief still unexpected

Majority of power consumers may not receive the benefit

ISLAMABAD:

Another hefty reduction in electricity tariffs is on the cards, but still a majority of the consumers may not get the relief.

The regulator will withhold some of the price cut in an attempt to add revenues to the national exchequer in the form of surcharges aimed at bailing out inefficient power distribution companies.

The tariff cut is expected following the filing of a petition by the Central Power Purchasing Agency (CPPA) with the National Electric Power Regulatory Authority (Nepra). It has sought a reduction of Rs3.28 per unit in the electricity price on account of fuel price adjustment for the month of May on the back of a decrease in international oil prices.

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The regulator will take the decision during a public hearing to be conducted on Thursday.

In April, the regulator had slashed the tariff by Rs2.62 per unit under the fuel price adjustment mechanism, but it passed on only Rs1.86 per unit to the consumers. The relief of 76 paisa was denied in order to allow power companies to recover arrears of gas infrastructure development cess amounting to Rs11 billion in installments from the consumers.

Apart from this, the regulator has not provided the benefit of lower tariff to owners of agriculture tube wells and domestic consumers using up to 300 units per month.

According to officials, the federal government requires the regulator not to pass on the impact of sharply lower global oil prices to the consumers and even the Economic Coordination Committee had approved it.



This was the reason why the regulator did not provide relief for domestic consumers using 300 units per month. It is apprehended that Nepra may continue to enforce the same policy for May as well.

In its petition filed on behalf of all state-owned power distribution companies, the CPPA explained that average fuel cost stood at Rs4.8087 per unit of electricity during May against the reference cost of Rs8.0982 per unit fixed earlier by Nepra. The reduced fuel bill brought down the generation cost by Rs3.2894 per unit.

According to the CPPA, 9.29 billion units were sold to the distribution companies in May and the total power generation cost was calculated at Rs44.708 billion.

“A decrease in the cost of furnace oil and diesel led to the reduction in power generation cost in the month,” the CPPA said.

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In May, power generation with the help of high-speed diesel cost Rs13.88 per unit, furnace oil cost Rs9.92 per unit, gas Rs5.57 per unit and nuclear power Rs1.18 per unit.

In overall electricity production, the share of hydroelectric power was 35.35%, furnace oil 28.68%, gas 27.8%, nuclear power 4.66% and high-speed diesel 1.2%.

Published in The Express Tribune, July 15^th,  2015.

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