FCA for July 2022: Nepra may allow charging consumers Rs4.34/unit extra

ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) has hinted to allow ex-Wapda distribution companies’ (XWDiscos) to collect an additional Rs4.34/unit from consumers, while it may ask K-Electric to reimburse Rs3.63/unit to its clients in the next month’s bills on account of monthly fuel charges adjustment (FCA) for July 2022.

Nepra held public hearing on Wednesday on the petitions of the privatised company and state-owned distribution companies. Disco had sought an additional FCA for July 2022 of Rs4.6954/unit due to its charging less than what was the generation cost. K-Electric, on the other hand, had given its consent to the regulator that it was ready to pay Rs3.476/unit back to its power consumers for charging the high price of electricity in their bills for July 2022, while per unit power generation cost was low.

Nepra Chairman Tauseef H Farooqi chaired the hearing while the authority members, including Engr Maqsood Anwar Khan and Rafique Ahmed Shaikh were also present. After deliberations on the data, submitted by the petitioners, Nepra hinted to allow KE to pay back Rs3.63/unit to its clients while XWDiscos to collect an additional Rs4.34/unit from power consumers in September.

These amounts have been preliminary calculated based on the data, the Central Power Purchasing Agency (CPPA) and KE had submitted to the regulator. Nepra will notify final decisions in a few days, which may vary from this figure.

Similarly, the regulator also scrutinised the data of K-Electric for quarterly tariff adjustments (QTA) for April-June 2022, for which the company sought permission for additional collection of Rs14.533/unit from its clients. It is to be noted that the impact of quarterly adjustments is usually not passed on to consumers under the uniform tariff policy, applicable across the country.

The regulator pinpointed that in July 2022, due to violation of the economic merit order (EMO) in power generation from all sources, an additional burden of Rs7.42 billion was piled up on power consumers. The LNG [Liquefied natural gas] shortage also caused a burden of over Rs6.93 billion.

According to the CPPA’s petition on behalf of XWDiscos, the reference fuel charges for July 2022 were Rs6.2879/unit, while the actual fuel charges were Rs10.9833/unit, so it sought the FCA of Rs4.6954/unit.

Total electricity generated from all sources in July was recorded at 14,150.91 GWh, at an average per unit cost of Rs10.7093/unit. The total cost of energy was Rs151.546 billion. Hydel generation was 4,976.93 GWh constituting 35.15 per cent, coal-fired power plants generation was 1,802.19 GWh (12.74pc) at a price of Rs20.2176/unit, High-speed diesel (HSD) based was at 205.97 GWh (1.46pc) at a cost of Rs27.8886/unit.

Similarly, residual fuel oil (RFO) based power generation was 876.92 GWh (6.2pc) with per unit cost of Rs35.6984, while gas-based power plants generation stood at 1,466.41 GWh (14.603pc) costing Rs9.9585/unit and Regasified liquefied natural gas (RLNG) based generation was 2,119.55 GWh (14.98pc) at Rs28.2899/unit. Likewise, power generation from mixed sources was 16.92 GWh at a price of Rs4.7567 per unit, and generation from bagasse was recorded at 40.63 GWh costing Rs5.9822 per unit. The electricity generated from wind was recorded at 518.50 GWh (3.66pc) and solar at 70.77 GWh (0.50pc) in July.

Moreover, electricity generation from nuclear sources was 2,009.54 GWh (14.2pc) at Rs1.0493/unit, and electricity imported from Iran was 46.57GWh that cost Pakistan Rs22.8380 per unit.

A spokesman for K-Electric said that in July 2022, the monthly FCA was lower, compared to the previous month, due to a decrease in fuel prices. The price of power purchased from CPPA-G in July 2022 had decreased by 31 per cent as compared to June 2022. Similarly, for RLNG, the price in July 2022 decreased by 16 per cent from June 2022. For furnace oil, the price in July 2022 increased by four per cent over June 2022.

“The Impact of quarterly adjustments is usually not passed on to consumers under the uniform tariff policy applicable across the country. However, the final decision rests with the Federal Ministry of Energy, the government of Pakistan, and the Nepra Authority,” he said.

Under the tariff mechanism, changes in fuel cost are passed on to consumers only on a monthly basis through an automatic mechanism, while quarterly tariff adjustments on account of variation in the power purchase price, capacity charges, variable operation and maintenance costs, use of system charges, including the impact transmission and distribution losses, are built in the base tariff by the federal government.

It is be noted that on August 12, Nepra allowed the K-Electric to collect an additional Rs11.1023/unit as monthly FCA for June 2022 from consumers in their electricity bills for August and September 2022, which has a combined impact of Rs25 billion to be collected.

Additionally, on August 10, Nepra allowed K-Electric to collect an additional Rs0.5715 per unit on account of quarterly tariff adjustments for three months from June to August 2022 that will be charged in the next three months, starting from August to October 2022.

Nepra, under the FCA for May 2022, has also allowed the K-Electric to charge an extra Rs9.518/unit in two months, including Rs2.6322/unit in July and Rs6.886/unit in August 2022 bills from consumers.

In June 2022, Nepra raised the base power tariff by Rs7.9078/unit for the fiscal year 2022-23. Later in July, the regulator approved the federal government’s request to charge the end-consumers of all Discos, including the K-Electric, a uniform tariff and collect the increased base power tariff from the consumers in the Financial Year 2022-23. The federal government has also notified an Rs3.50 per unit increase (out of Rs7.9078/unit) in the national base electricity tariff.

It is interesting to note that because of public protests against inflated bills, Prime Minister Shehbaz Sharif announced that 17 million power consumers would be exempted from paying the FCA. The next day, Federal Minister for Power Khurram Dastgir said that households consuming less than 200 units per month will also be exempted from paying the FCA. K-Electric has notified that from Aug 26, it would issue revised bills to its consumers after receiving notification from the federal government.