Nepra Approves Record Fuel Cost Adjustment Amid Government Pressure

In a significant development, the National Electric Power Regulatory Authority (Nepra) has greenlit a record fuel cost adjustment (FCA) despite initially announcing an investigation into the demand made by distribution companies (Discos). The approved hike will impose an additional burden of Rs55 billion on electricity consumers.

Initially, the Discos had requested an FCA of Rs7.13 per unit, prompting Nepra to launch a probe into the matter. However, following alleged pressure from the government, Nepra reversed its stance and approved an FCA of Rs7.06 per unit.

Sources suggest that the government emphasized the potential cash flow challenges for the Discos and the impact on performance benchmarks agreed upon with the International Monetary Fund (IMF). Consequently, Nepra decided to defer the investigation until after Ramadan.

The approved adjustment, applicable to all consumer categories except Electric Vehicle Charging Stations (EVCS) and lifeline consumers, will be reflected separately in consumers’ bills based on units consumed in January 2024.

Despite public concern over the substantial increase in fuel costs, Nepra has decided to proceed with the approved FCA, marking the highest ever adjustment, nearly 96% higher than the pre-fixed fuel cost. This raises questions about the forecasting abilities of the power sector bureaucracy.

While Nepra has released a performance evaluation report for Discos for FY2022-23, it lacks mention of any accountability measures for the shortcomings identified. Instead, Nepra plans to issue directives to Discos and grid operators to improve performance and ensure compliance with targets and benchmarks.

Additionally, Nepra has requested the energy ministry to address issues related to system stability and increased electricity demand, which has dwindled due to unaffordable tariffs. The grid operator attributes the high fuel costs to the utilization of thermal power plants for stability and reliability amidst unprecedented weather conditions and low demand.

As consumers continue to grapple with soaring electricity bills, the lack of accountability in addressing systemic issues raises concerns about transparency and governance within the power sector.

Story by Khaleeq Kiani

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