September 13, 2002	Friday	Rajab 5, 1423

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ISLAMABAD, Sept 12: The National Electric Power Regulatory Authority (Nepra) on Thursday allowed Karachi Electric Supply Corporation (KESC) an average-based tariff increase of 6.5 per cent or 27.23 paisa per unit with immediate effect.

The Nepra has asked the government to notify the new tariff schedule immediately. It also said the base tariff increase of 6.5 per cent would remain capped for seven years, starting from the date of KESC privatisation, a copy of the Nepra judgment obtained by Dawn suggests.

The Nepra also approved a new inflation-based tariff formula for seven years under which the KESC tariff would be revised on quarterly basis to adjust increase in three tariff components. The quarterly adjustment would be made normally on or around every first day of January, April, July and October.

These components include fluctuation in fuel price, change in power rates for the electricity to be purchased from independent power producers (IPPs) and operation and maintenance (O&M) cost according to inflation rate (consumer price index).

The three components form around 50 per cent part of the overall tariff. This means that only line losses and salary expenditure have been capped but the salaries portion would remain linked, though with a minimal impact with the overall inflation.

Under the new schedule, the average tariff has been increased by 27.23 paisa per unit with highest chunk of increase to be borne by agricultural and domestic consumers.

The agricultural tariff would go up by 15.40 per cent, followed by 8.37 per cent for domestic consumers and public lighting, 7.81 per cent for industrial sector, 3.76 per cent for general (commercial) consumers and 2.45 per cent for bulk consumers.

On per unit cost basis, the domestic tariff would go up by 28 paisa per unit, industrial rates by 35 paisa, commercial (general) tariff by 28 paisa, agricultural tariff by 54 paisa, bulk tariff by 13 paisa and public lighting tariff by 55 paisa.

In this way, the domestic tariff would increase from Rs 3.38 to Rs 3.66 per unit while industrial tariff would go up from Rs 4.51 to Rs 4.86 per unit. Similarly, power rates for general consumers would increase from Rs 7.44 to Rs 7.72 per unit and Rs 3.48 to Rs 4.02 per unit for agricultural consumers. Bulk tariff would go up from Rs 5.43 to Rs 5.56 per unit and public lighting rates from Rs 6.57 to Rs 7.12 per unit.

The tariff for around 300mw electricity being purchased by the KESC from Wapda would go up by 45 paisa per unit, i.e., from Rs 3.34 to Rs 3.79 per unit.

The KESC with the backing of the Privatisation Commission and two donors — The World Bank and Asian Development Bank — had demanded an up-front increase of 16 per cent and a ten- year inflation-cum-investment based tariff formula to attract private investors to purchase the utility.

The Nepra sources said the approved tariff increase would yield around Rs 2.2 billion to the KESC which would still remain short of revenue to the tune of Rs five billion. This would perhaps be provided by the federal government, the sources said.

A claw-back mechanism has also been provided in the 7-year inflation-based tariff formula so that tariff is automatically reduced in case the return on new investment goes up beyond a certain limit.

A senior Nepra official explained that the KESC was expected to achieve that return level after three years of privatisation but there would be no government guarantee involved if the return on investment did not reach that limit.

The Karachi Electrict Supply Corporation (KESC) has been directed to simplify the tariff bill to combine surcharge and additional surcharge so that the charges payable by the consumers remain the same.

Similarly, the bills provided to consumers for payment should be simplified to indicate overall fixed, variable and other charges as a result of the tariff schedule and applicable terms and conditions thereof, so that the consumers could understand the bill according to usage items.

The official said major consideration of the determination was that privatisation was the only solution to the prevailing deteriorating condition of the utility.