February 19, 2007	Monday	Safar 1, 1428

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ISLAMABAD, Feb 18: The National Electric Power Regulatory Authority has turned down a request of the Karachi Electric Supply Company to increase consumer tariff by about 22 paisa per unit for all categories on account of higher fuel prices.

On examination of accounts, Nepra rather found out that the consumer tariff actually required to be reduced by about four paisa per unit. The consumer tariff was, however, kept unchanged because of a nominal difference that would be adjusted in the next quarterly tariff revision.

Under the sales agreement with the new management of the KESC, the power tariff for consumers in Karachi is subject to adjustment every three months to compensate for variation in the fuel price and the cost of power purchased and every year in July for indexation due to inflation.

The KESC had submitted a tariff-adjustment request on Jan 25 for variation in fuel price and cost of power purchased for the October-December quarter in 2006. The KESC had stated that variation in fuel cost due and generation mix amounted to Rs858 million or 8.58 paisa per unit. Similarly, variation in cost of power purchased worked out to be Rs1,300 million or 13 paisa per unit. As such, the combined effect of the two heads was calculated by the KESC at 21.57 paisa per unit.

Nepra, in its determination a few days ago, said there was a left-over amount of Rs1,768 million at the end of July-September 2006 period on account of fuel price variation and there was no left-over amount on account of power purchase cost. After accounting for the left-over balance of Rs,1768 million, the required adjustment on account of fuel price variation works out at 9.10 paisa per unit and 13 paisa per unit on account of power purchase cost variation. “The combined effect thus works out as decrease in tariff by paisa 3.90 per kwh,” Nepra said.

According to the prescribed mechanism, the maximum adjustment that can be allowed in a quarter due to variation in fuel price is 2.5 per cent and due to variation in power purchase price is 1.5 per cent of average sale rate.

Therefore, the allowable adjustment on account of variation in fuel price works out as increase in tariff by 9.10 paisa per unit and on account of power purchase cost as decrease in tariff by 9.57 paisa per unit. “The combined (net) effect thus works out as decrease in KESC’s consumer end tariff by 0.47 paisa per unit,” Nepra said, adding that the negative balance of Rs390 million on account of power purchase cost after making necessary adjustment for the quarter (October-December 2006) shall, however, be adjusted in the next quarter.

“As the required decrease in KESC’s tariff is not significant, i.e. less than one paisa per unit, Nepra has decided not to alter the existing tariff for this quarter and pass on the required adjustment to the next quarter,” Nepra concludes.

Much before the privatisation of the KESC in November 2005, the government had put in place a multi-year tariff for the KESC to attract private investors to purchase the company that envisaged quarterly adjustments for fuel prices, either on account of its own plants or that of independent power producers, and also required annual adjustments on account of inflation as pass through items to consumers.