The Federal Government on Friday accepted a hike of Rs 1.95 per unit in tariffs of power Distribution Companies (Discos) and KE across the board.
The hike of Rs 1.95 per unit for Discos the 3rd consecutive increase in just 3 days, under the garb of monthly fuel price adjustment, quarterly tariff adjustment and base tariff adjustment.
The overarching objective of the recent increase in tariffs is to reach the staff level agreement with the International Monetary Fund (IMF) – a prerequisite for the next tranche release, an anecdotal survey of experts revealed. The Power Division has issued SROs for all the Discos and Karachi Electric in this regard.
According to the determinations the cumulative impact of three consecutive increases has been calculated at Rs 250 billion or Rs 4.33 per unit (FCA, Rs 1.53 per unit + QTA, Rs 0.83 per unit + Rs 1.53 increase in base tariff, 1.95 per unit) which after addition of taxes and surcharges in the price of energy will be a whopping increase of Rs 6 per unit in bills of February 2021.
Nepra dispatched its determination to the Power Division for notification in the official gazette which was reportedly waiting for it. The determination, has been signed by the four members but not the Chairman.
Although, the tariff determination issued by the regulator does not clarify the impact of Rs 1.95 per unit on KE consumers, an official stated that since Economic Coordination Committee (ECC) has already approved this increase on a summary of Power Division after which Federal Cabinet ratified the decision, the Power Division has also issued a notification for KE consumers. KE’s petitions for FCA and QTA are also scheduled to be considered by Nepra, late this month, in which the KE wants to generate Rs 44 billion from consumers.
Nepra determines tariffs for seven Discos for the FY 2018-19 & FY 2019-20 individually under the Single Year Tariff Regime (SYT) for both their distribution and supply functions separately, including revision in the Power Purchase Price (PPP) references. Similarly, for the Discos under the Multi-Year Tariff (MYT) regime, i.e. FESCO, LESCO and IESCO, the Authority through its decisions allowed adjustment in the tariff components for FY 2019- 20, including adjustments on account of under/over recovery of the previously allowed revenue requirement of Rs 330 billion which was Rs 3.34 per unit.
The overall revenue requirement has been calculated by Nepra at over Rs 1.68 trillion to be recovered by all the Discos in years to come.
The Power Division submitted a summary to the Federal Cabinet, which approved a universal increase of Rs 1.95 per unit across the board to generate a revenue of Rs 145 billion, out of allowed revenue of Rs 330 billion for one year. For the remaining amount, which is Rs 185 billion, the government will give a subsidy, in addition to budgeted subsidy of Rs 140 billion. However, the remaining increase will also be passed on to the consumers at an appropriate time.
With current increase, the base tariff of consumers using 50 units monthly will increase to Rs 3.95 per unit; for 1-100 units, tariff will be Rs 7.74 per unit from Rs 5.79 per unit, 101-200 units from Rs 8.11 per unit to Rs 10.06 per unit, 201-300 units, from 10.20 per unit to Rs 12.15 per unit, 301-700 unit, from Rs 17.60 per unit to Rs 19.55 per unit and above 700 units, from Rs 22.70 per unit to Rs 22.65 per unit.
KE, in its request given that as per the uniform tariff policy of the Government, set out in the National Power Tariff and Subsidy Policy Guidelines 2014, the tariff charged to KE consumers is the same as charged to the consumers of any other Disco across Pakistan. Accordingly, KE understands that the uniform tariff determined would also be applicable to its consumers in accordance with the GoP Uniform Tariff Policy.
KE further submitted that as per the Nepra (Alterative & Renewable Energy) Distributed Generation and Net Metering Regulations, 2005, the incremental units – energy purchased by Discos exceeding the energy sold to the DGs in a month – are purchased by Discos at National Average Purchase Price (NAPP), which currently is Rs.9.95/kWh. With the notification of the proposed tariff increase, the NAPP will increase from Rs.9.95/kWh to its. Rs12.95/kWh. Therefore, for the purpose of purchase of incremental units from DGs, only variable component of NAPP, i.e., Rs 5.82 kWh, may be notified considering that tariff for solar generation is decreasing.
On the point of having a uniform tariff for K-Electric consumers, the representative of Federal Government submitted that determination of K-Electric’s tariff is not covered within the parameters of Scction 31(4) of the Act, therefore, KE’s issue will be dealt with separately.
Nepra, in its determination, has noted that the Federal Government through its motion has proposed a consumer end tariff for certain consumer categories higher than the uniform tariff if consolidated on the basis of Nepra’s national average. Even though the Federal Government in its motion and during the hearing stated that inter- Disco tariff rationalization is not aimed at raising any revenue for the Federal Government as it is within the determined consolidated revenue requirement of all the Discos, the Authority observed that as per the Act, Nepra has been entrusted to determine the appropriate level of cross-subsidization and the Federal Government has no legal powers to alter the level of cross-subsidy set by the Authority. The Authority, however, also understands that the Federal Government before filing the motion has already obtained the approval of the proposed tariff from the ECC and the Cabinet, and any fresh approvals in this regard would further delay the notification process, which has huge financial implications. Therefore, keeping in view the severity of the issue, and the consumer interest, the Authority has decided to accept the uniform tariff proposed by the federal government.