Nepra okays 21 paisa cut in Discos tariff

The National Electric Power Regulatory Authority (Nepra) on Wednesday finalised about 21 paisa per unit reduction in electricity rates for ex-Wapda distribution companies (Discos) for a month under the monthly fuel cost adjustment (FCA).

At a public hearing presided over by Nepra chairman Tauseef H. Farooqui, the regulator did not agree immediately to a Rs13.4bn worth of three year-old adjustments on the basis of which the Discos had demanded about 80 paisa per unit increase in monthly FCA.

The lower fuel cost, on formal notification by the regulator, would be adjusted in consumer bills in the upcoming billing month of August and cause about Rs3bn negative revenue to Discos. These rates would not be applicable to K-Electric consumers or agricultural and residential consumers of Discos consuming up to 50 units per month.

The CPPA had requested the regulator to allow about 80 paisa per unit additional charges to consumers for electricity consumption in June 2021 under the FCA mechanism because of about Rs7.6 billion adverse fuel price variations when compared with pre-determined reference costs.

On questioning by Nepra’s team, Central Power Purchasing Agency (CPPA) CEO Muhammad Rehan said about Rs13.38bn claims had been made on account of previous adjustments including those involving the period since March 2019 following a reconciliation process. He said the process also revealed about Rs11.65bn operational and maintenance (O&M) cost wrongly built in the tariff for the same period, resulting in a net additional cost of about Rs1.7bn.

On further questions, he said the lower adjustment of Rs11.65bn would be made part of quarterly tariff adjustment at a later stage. This annoyed the Nepra members, with the chairman stating that the immediate issue at hand was additional burden on consumers on account of three-year old adjustments while the purported relief that was not being advocated belonging to the same period.

The Nepra team raised question marks over the legal issues pertaining to time-bar for consideration in FCA and decided not to consider the previous adjustments until examining the legal and contractual requirements. The Nepra members also expressed concern over costs arising out of transmission system constraints and showed displeasure that stakeholders in the power companies were not taking responsibility for financial and technical limitations.

Responding to a question over repeated and prolonged load shedding last month because of fuel mismanagement, the Nepra chairman said the fuel shortage was outside the power regulator’s domain and a cabinet committee was already investigating the matter.

On behalf of Discos, the CPPA has demanded an additional charge of about 80 paisa per unit from consumers of Discos on account of higher generation cost of electricity consumed in June to generate over Rs11bn in additional cash flows to power companies.

The CPPA said the Discos had charged consumers a reference fuel tariff of Rs5.93 per unit in June while the actual fuel cost turned out to be Rs6.74 per unit and hence 80 paisas per unit should be allowed to be recovered from consumers’. The Nepra, however, noted that actual fuel cost was Rs5.72 per unit, hence a 21 paisa per unit refund to consumers through next bill adjustment.

The CPPA reported that total energy generation from all sources in June stood at 14,361 gigawatt hour (Gwh) at a cost of Rs81.2bn or Rs5.65 per unit. Of this, about 13,971 Gwh were delivered to the Discos at Rs94.16bn, at an average rate of Rs6.74 per unit.

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