ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) expressed concern on Thursday that the impact of fuel costs for February consumption actually meant a Rs7.63 per unit tariff increase, instead of the Rs5 per unit sought by power companies in their petitions. Nepra was taken aback by the non-compliance of its orders and the rising costs of fuel.
The regulator also recommended that the government reorganize its tariff system, which required the industrial sector to pay an additional Rs8 per unit in order to give domestic customers an estimated Rs244 billion in subsidies annually.
Nepra Chairman Waseem Mukhtar expressed frustration and raised a red flag, stating that industry must be the engine of economic progress.
He asked the government and electrical providers to examine possible restructuring options that would boost demand for electricity and economic activity.
Nepra requests cooperative economic growth analysis and tariff adjustment to lower industry rates.
Nepra Member Rafique A. Shaikh noted that the regulator’s recommendations regarding an analysis of demand growth, including ending revenue-based load shedding, had been ignored by the power system’s Ministry of Energy, Central Power Purchasing Agency (CPPA), distribution companies (Discos), and National Transmission Company for several months.
He explained that the increase in capacity payments and energy price payments was due to a 26–80% difference in the benchmark prices of coal, LNG, solar, and other fuels. This fluctuation resulted in increased foreign exchange losses, especially in power plants with low utilisation factors. Customers were compelled to pay for 70% of the capacity that was not used. He stated that the thermal plants’ average utilization was 35%, and that the energy and capacity purchase prices accounted for 65% of the facilities’ total capacity.
Power firms were requesting an extra Rs4.99 per unit in fuel cost adjustment (FCA) for electricity consumed in February, according to Nepra Member Mathar Niaz Rana. However, an additional Rs2.63 per unit of the same component would go toward quarterly tariff adjustments (QTA) for capacity purchase pricing.
The sector would not be able to withstand such shocks on a continuing basis, and the net rise in fuel costs would be Rs7.63 per unit. This meant that instead of the Rs34 billion that the electricity providers had claimed, consumers would have to pay an extra over Rs53 billion next month for usage in February.
He said, “This is very alarming,” noting that while capacity payments in Pakistan ranged from 62 to 70 percent, many efficiency and capacity-related expenditures were 30-35 percent based on worldwide benchmarks.
In order to achieve international best practices without upsetting the terms of the power producers’ contracts, Mr. Rana advised the teams from the Ministry of Energy, CPPA, and Nepra to get together.
Rehan Akhtar, a CPPA representative, acknowledged that all fuel costs were nearly the same as benchmarked in the reference tariff because all fuel prices remained stable. However, the higher FCA was brought about by a change in the energy mix, which required some costly plants for system stability because it included higher LNG, lower hydro, and a 12% decrease in energy consumption.
Mehfooz Bhatti, the Joint Secretary of Power Division, agreed that the expensive supply and subsequent switch to alternative energy sources were the primary causes of the demand drop, but the key issue at hand was planning. He objected with Nepra’s proposal to halt commercial load shedding for a few months, saying he could not allow the sector’s reduced recoveries and increasing financial losses.
The CPPA’s demand for an additional fuel charge, which is 113 percent more than the pre-fixed fuel cost of Rs9.42 per unit that was already paid to consumers in February, raises doubts about the power sector bureaucracy’s ability to estimate fuel costs, even for a six-seven-month period.
In comparison to the pre-determined fuel prices announced at the beginning of the current fiscal year, the additional FCAs have stayed more than 80 percent higher in recent months. In addition to the approximately 26% yearly base tariff rise and the additional 18% increase under the existing quarterly tariff adjustment, this FCA increase comes with other increases. Because over 77% of the electricity came from less expensive local resources, consumers would still be forced to pay high rates even in the event of reduced consumption.
In a petition, the CPPA—functioning as Discos’ commercial agent—requested an extra FCA of Rs4.99 per unit in April’s billing month for power used in February. The real gasoline cost more than doubled to Rs9.425 per unit, according to the claim, whereas the reference fuel cost for January was fixed at Rs4.43 per unit.
The data revealed patterns of decreasing usage. In addition, February’s consumption was 8.5 percent less than it was in the same month last year (7,516 GWh), and it was around 14 percent less than it was in January (7,938 GWh). This February’s FCA of Rs4.99 per unit is nearly five times higher than the 85 paise it was in the same month previous year.
