ISLAMABAD, Dec 24: The National Electric Power Regulatory Authority (Nepra), despite opposition from one of its members and some other institutions, has increased the power tariff of the 1,054MW Jamshoro Thermal Power Company (JPCL) and extended its applicability period for an unprecedented 10 years.
While the authority allowed the tariff increase and validity period extension on the request of the JPCL, the Central Power Purchasing Authority (CPPA), the National Tariff Commission and various consumer groups opposed the move saying that it called into question the government’s long-term commitments and Nepra’s rules and traditions.
The Privatisation Commission, which was the only stakeholder supporting some of the grounds on which the JPCL had sought the tariff increase, was seen changing goalposts and violating the principles of tariff setting.
The revised tariff will have a long-term negative impact on consumers, although it is not clear how much impact would be passed on to them, given the fact that consumer tariffs have stood frozen for two years. Nepra’s most senior member, Abdul Rahim Khan, opposed the move.
He said the sanctity of the approved multi-year tariff was that “the regulator would not alter it during the committed duration or control period unless justified on account of unforeseen events… eroding the aforesaid understanding of the investors and diluting the commitment of the regulator through an intermediate variation of tariff formula and associated parameters prior to the completion of the control period is neither in the interest of privatisation of the JPCL nor the public.”
Mr Rahim wrote that the JPCL had not yet carried out any independent revenue and costing study. Since the intending investors would bid on the basis of an expected revenue stream derived from any tariff that is given, a higher or lower tariff would result in a correspondingly higher or lower bid.
He observed that the five-year tariff was fixed following a formal decision by the cabinet committee on privatisation and it was accepted by all stakeholders "that the formula would not be altered during the currency of the multi-year tariff, unless there is an unforeseen event.
“It is, therefore, of utmost importance that mid-term adjustment not explicitly mentioned in the notified tariff formula is not perceived by the intending investors as a violation of the understanding and commitment of the regulatory company.”
The JPCL had sought increase in tariff on the basis of rise in its equity from Rs6.1 billion to Rs7.74 billion because of conversion of its liabilities by the Water and Power Development Authority to equity and conversion of a Rs4 billion re-lent foreign loan into equity by the federal government. Secondly, it demanded that its earlier five-year tariff approved by Nepra should be extended from June 2009 for another five years to June 30, 2014, to attract foreign investors in the privatisation.
