NEPRA approves yet another increase in electricity tariffs

ISLAMABAD: The National Electric Power Regularity Authority (NEPRA) sanctioned yet another increase in electricity tariffs, instituting a quarterly modification of Rs1.7432 per unit for the upcoming three months.

The new price hike will take effect from September 2024 till November 2024.

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The resolution will permit power distribution firms and K-Electric to recuperate Rs43.23 billion through adjustments for the fourth quarter of the fiscal year (FY) 2023-2024.

The latest increase will impact clients of both, state-run distribution companies and K-Electric. This spells yet another misery on public already overburdened with increasing taxes and double digit inflation. Citizens are paying almost half of their monthly expenditure on electric bills alone each month.

A substantial segment of the recovery, totally Rs21.253 billion, is designed for the capacity charges paid to the independent power producers (IPPs) to sustain generation capacity, irrespective of consumption levels.

An additional Rs7.368 billion will be reclaimed in system usage fees and market operator charges, while Rs11.23 billion is linked to the effects of transmissions and distribution (T&D) losses. Variable operation  and maintenance fees accounts for an extra Rs3.5 billion.

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The application of an 18 per cent good and services tax (GST) on the total recovery amount will further increase the burden by Rs7.78 billion. This will upsurge the total to Rs51 billion to be gathered from the consumers.

A public hearing  regarding the adjustments was held on August 26, presided over by NEPRA Chairman Waseem Mukhtar. During the hearing, the distribution companies (DISCOs) indicated that the adjustment were primarily due to diminished sales compared to forecasts for the quarter.

However, NEPRA pointed that certain DISCOs, such as Peshawar Electric Supply Company (PESCO), had  failed to meet energy demands and instead opted for load shedding. While the shortcut helped reduce their share of capacity charges, it contributed to lower sales.

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Meanwhile, the Central Power Purchasing Agency (CPPA), acting on behalf of the DISCos, requested Rs51 million for legal expenses related to local and international proceedings. However, NEPRA rejected the request, citing that such costs were already included in the Market Operation Fee (MOF).

The power regulator had previously approved Rs500 million for legal expenses as part of the CPPA MOF for the FY 2023-2024.

In its plant-wise data, the CPPA also included Rs72.23 million related to the Kot Addu Power Company Limited (KAPCO) charges for tax differentials from July 1 till October 24, 2022. NEPRA also did not consider this claim.

Moreover, an amount of Rs73.18 million was charged by the Central Power Purchasing Agency (Guarantee) (CPPA-G) to DISCOs for the Private Power and Infrastructure Board (PPIB) fee as part of the Pak Matiari–Lahore Transmission Company Pvt Ltd (PMLTC) invoice for January 2024 under separate proceedings and will be addressed once the proceedings concluded.

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Meanwhile, NEPRA determined a positive adjustment on electricity of Rs43.23 billion based on variations in capacity charges, variable operation and maintenance costs, additional recovery on incremental sales, system usage charges, market operator fees and the impact of fuel cost adjustments on T&D losses for the fourth quarter of FY2023-24.

The approved quarterly adjustment will be applied uniformly across all consumer categories, excluding lifeline consumers. The same adjustment will also be applicable to K-Electric consumers, except for Lifeline and prepaid customers.

On a slightly positive note, NEPRA did approve a reduction of Rs0.37 per unit in the monthly fuel charge adjustment for July 2024 electricity bills, which will be reflected in the September 2024 billion cycle.

The adjustment will apply to all consume categories, excluding lifeline consumers, domestic consumers using up to 300 unites, Electric Vehicle Charging Stations (EVCS), prepaid electricity consumers, and agricultural consumers across all DISCOs.