03 December 2004	Friday	20 Shawwal 1425

Please Visit our Sponsor (Ads open in separate window).

ISLAMABAD, Dec 2: The federal government has asked the National Electric Power Regulatory Authority (Nepra) to reconsider its determinations on the tariff petitions of eight distribution companies (Discos) of the Water and Power Development Authority (Wapda) which required more than Rs68 billion government subsidy.

When contacted, Adviser to the Prime Minister on Finance Dr Salman Shah confirmed that the water and power ministry had written to Nepra to reconsider its determinations on the basis of cost of service and cash flow needs of the Discos.

He said that Nepra would be holding hearings on tariff determination for distribution companies on the request of the power ministry. In reply to a question as to on what grounds the reconsideration of tariff determinations had been requested, Secretary Finance Nawid Ahson explained that it was a very technical and complicated subject and a number of points had been raised in the review request filed by the power ministry.

He said that the power ministry was not satisfied with various assumptions of Nepra while determining the tariff petitions of eight distribution companies. An official of the water and power ministry said that a four-line letter had been written to the Nepra suggesting the regulator to determine the tariff purely on the basis of cost of service and cash needs of the companies.

It is the prerogative of the federal government to decide how much, in what form and to which company it should provide subsidy, the official quoted the letter as saying. He explained that the Nepra had issued its determinations on the basis of 'imprudent cost' which meant that it did not allow the Discos to recover more than 15 per cent line losses from consumers.

The Nepra had held that losses in access of 15 per cent was an imprudent cost which should not be passed onto consumers and be met through the government subsidy so as to maintain a uniform tariff across the country.

In that case, the ministries of water and power and finance had estimated that the federal government would be required to provide a subsidy of Rs58 billion, Rs68 billion and around Rs100 billion under three different scenarios. That was a difficult proposition for the government which wanted that a part of this burden should be borne by the consumers through power tariffs.

Please Visit our Sponsor (Ads open in separate window)