Nepra public hearing: Rupee devaluation, electricity tariff hike to hit consumers hard

ISLAMABAD: Apart from the recent hike in base tariff, people must brace themselves for another potential financial strain resulting from the Pak rupee’s depreciation against the US dollar, as the recent electricity tariff hike empowers the government to transfer the burden of rupee devaluation to consumers through their utility bills, impacting all segments of society and the economy on the whole.

Rather than tackling the multi-billion rupees worth of inefficiencies in the power sector, the government significantly increased the average electricity base tariff, causing concerns among citizens, according to findings of the National Electric Power Regulatory Authority’s (Nepra’s) public hearing, held after the federal government’s instant motion for a uniform tariff in the entire country.

The recent national base-tariff increase of Rs4.96/unit, which would take the existing Rs24.82 per unit rate to Rs29.78/unit, had been calculated at Rs287 a dollar. If the rupee continues to devalue, consumers may face further hikes in their power tariffs through monthly fuel charges adjustments (FCAs) and quarterly adjustments.

Nepra Chairman Tauseef H Farooqi conducted the proceedings, while the authority’s members, including Rafique Ahmad Shaikh (member technical) Sindh, Amina Ahmed (member law) Punjab, and Engr Maqsood Anwar Khan from Khyber-Pakhtunkhwa were present. However, Mathar Niaz Rana (member tariff and finance) from Balochistan was absent.

The chairman said the Nepra’s role was to determine the most prudent tariff, and decisions on tariff allocation, subsidies, and burden-sharing was with the federal government. He emphasized that managing subsidies and segmenting society is a political decision purely. He made it clear that Nepra could not specify a tariff for the export sector, leaving that authority with the government.

According to the petitioner (government), the government was giving Rs158 billion subsidy, while for K-Electric, it was Rs298 billion in the current fiscal year.

Consumer advocates and experts expressed concerns over the ill impact of tariff hike and currency devaluation on citizens’ well-being and overall economic stability. The increased financial burden on power consumers could affect spending patterns and investment decisions, potentially impacting economic growth, they added.

Critics questioned why the government and the regulator had not effectively addressed the generation, transmission, and distribution losses, resulting in significant financial losses. They argued that loyal consumers should not be burdened with an unjust tariff hike.

Tahir Basharat Cheema, former MD of Pakistan Electric Power Company (Pepco), and current energy adviser to All Pakistan Textile Mills Association (Aptma), criticised the decision to raise the tariff without conducting sensitivity studies or applying econometrics models. He cited a study by the Pakistan Institute of Development Economics (PIDE), which showed that a one per cent increase in power tariff led to a 0.23 per cent decline in the country’s exports.

Cheema suggested ending the facility that allows Discos to do revenue-based load-shedding. The Nepra chairman responded that legal proceedings in that regard had already been initiated, acknowledging past failures in planning power capacity without proper demand and supply studies.

Farooqi said, “In the past, we have increased the power capacity like a wild shrub, without doing a study for power demand and supply. We were shooting in the dark. We have started work on it now.”

Another Nepra member emphasised that inefficiencies in the power sector were a major concern, without specifically naming the underperforming Discos facing bankruptcy.

Hafiz Naeemur Rehman of Jamaat-e-Islami, attending the proceedings from Karachi, expressed concern that the tariff hike would disproportionately affect the poor, salaried, and middle-income people. He urged Nepra not to burden power consumers with the regulator’s inefficiencies. He questioned why legal cases were not pursued and Independent Power Producers (IPPs) report had been brushed under the carpet.

He also raised concerns about K-Electric running outdated plants with low efficiency, resulting in higher utility bills for Karachiites, and at the same time Nepra was extending its licence.

The Nepra chairman responded by defending the extension in K-Electric’s license for six months, stating that the market was not exclusive, and other parties had the opportunity to apply for a license in Karachi. Until there was a viable alternative power supplier in Karachi, extending K-Electric’s licence was necessary to maintain continuity of the city’s power supply.