Import expensive fuel or brave long outages: Nepra chief

While finalising an unprecedented Rs7.90 per unit additional fuel cost adjustment (FCA) for distribution companies (Discos) for next month, the National Electric Power Regulatory Authority (Nepra) noted on Monday that Pakistan was left with no choice but to face loadshedding or generate electricity using expensive fuel oil.

At a public hearing on a petition for a Rs7.96 per unit increase in FCA for electricity consumed in May, Chairman Nepra Tauseef H Farooqui, who presided over the event, said though a formal notification would be issued later after verification of evidence, the minimum increase in FCA would be about Rs7.90 per unit for ex-Wapda Discos with a financial impact of Rs113bn during the upcoming billing month (July).

The Central Power Purchasing Agency (CPPA), on behalf of all ex-Wapda Discos had sought about 134pc increase in their fuel price adjustment at the rate of Rs7.9647 per unit (kwh) for electricity sold in May. It said consumers were charged a reference fuel cost of Rs5.932 per unit in May, but the actual cost turned out to be Rs13.90 per unit, hence an additional charge of about Rs7.96 to consumers.

The regulator, however, finalised Rs7.90 per unit of additional FCA after minor disallowances. Responding to questions over expensive power generation, the CPPA officials explained that fuel prices had gone up by almost three times. They said the LNG was not available in the market as it was being picked by the European nations with deep pockets and even if an LNG cargo could be found, it was costing close to $42 per mmBtu, which was not in the interest of the consumers.

Mr Farooqui observed that, in the given circumstances, Pakistanis either have to import expensive fuel oil or brave loadshedding. For God’s sake, power plants should be set on cheaper indigenous resources in the future instead of imported fuels, he said.

The CPPA officials said the imported fuel, particularly coal, furnace oil, and LNG, was not only expensive but their availability had become unreliable, hence the cost escalation.

The higher electricity rates would be charged to all consumers in the coming billing month (July), except to those using fewer than 50 units per month. This tariff is not applicable to KE consumers directly, although a part of it subsequently becomes part of KE’s tariff adjustments on account of its import from the national grid.

The hearing was told that almost 54pc of power generation came from cheaper domestic resources with static prices. Data showed that the share of domestic fuel sources in overall power generation improved to a robust 54pc in May when compared to 50.58pc in April and 45pc in March. The share of hydropower supply in the overall basket improved to 24.5pc in May, from 18.55pc in April and 16.35pc in March. Hydropower has no fuel cost.

The share of nuclear power dropped significantly to about 13pc in May, against 17.4pc in April, mainly because of maintenance of one of its large plants. Yet, nuclear power maintained its second place among domestic fuels.

The second biggest contribution to the overall power supply of about 23pc came from imported RLNG in May, against 19.4pc in April and March. The share of domestic gas in power generation slightly increased to 10pc in May from 9.85pc in April.

The share of coal-based power plants came down to 13.8pc in May from 16.74pc in April and 25pc in March because of low coal stocks amid the financial limitations of power producers and higher global prices. Coal-fired generation provided 33pc and 32pc of total power supply in January and February, respectively.

The cost of power generation from domestic gas increased to Rs10.12 per unit in May compared to Rs8.4 per unit in April and Rs7.75 per unit in March.

Three renewable energy sources — wind, bagasse and solar — together contributed 6.5pc of total power supply. Wind and solar have no fuel cost, while that of bagasse has been calculated at Rs5.98 per unit unchanged.

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