ISLAMABAD, July 27: The electricity tariff is likely to be increased early next month by 12 to 15 per cent for Wapda’s distribution companies and by three per cent for the Karachi Electric Supply Company (KESC).

There will be 10 to 12 per cent increase in base tariff and the remaining 2-3 per cent under the automatic fuel adjustment formula. The average tariff would increase by about Re1 per unit (kWh). The hike will be in the rates of all categories of consumers although consultations are in progress to pass on less burden to lifeline and small domestic consumers.

The government has already increased electricity rates for domestic consumers by about 16 per cent in the 2008-09 budget by withdrawing general sales tax subsidy. Minister for Water and Power Raja Pervez Ashraf has said repeatedly that an increase in electricity rate is inevitable.

The National Electric Power Regulatory Authority (Nepra) has already completed the process of public hearings on petitions filed by distribution companies for increase in their base tariff. Nepra estimates that the distribution companies will need to be provided a total of about Rs64-65 billion through increase in the base tariff to meet their annual revenue requirement for 2008-09.

Informed sources said the electricity rates of distribution companies — Islamabad, Lahore, Gujranwala and Faisalabad — needed an increase ranging between 6 and 10 per cent because of their comparatively sound financial health. Rest of the distribution companies — Multan, Hyderabad, Quetta and Peshawar — will be allowed a tariff increase of 22 to 30 per cent because of their higher line losses and weaker fiscal position.

Because of political reasons, the government plans to maintain a uniform rate across the country. To achieve this objective, the government will increase electricity rates of all companies by 10 to 12 per cent by charging higher than actually required rates from consumers of Islamabad, Lahore, Faisalabad and Gujranwala Electric Supply Companies to subsidise consumers of Multan, Hyderabad, Quetta and Peshawar Electric Supply Companies.

For this purpose, a new power surcharge will be imposed on all consumers of distribution companies of Wapda to equalise rates for all companies. A law to impose power surcharge has already been introduced through the Finance Bill 2008-09.

Informed sources said the slab for lifeline consumers would be expanded from 50 units per month to 100 units per month and their rates would be increased from existing Rs1.40 per unit to about Rs2.75 per unit (kWh). Similarly, the rates for consumers of 100-300 units per month will also be increased by about 15 per cent but they will continue to enjoy a benefit of subsidy that would come from higher tariff increase for industrial and commercial consumers.

In addition, the impact of increase in fuel prices may also be passed on to consumers of KESC and distribution companies of Wapda early next month. The government has already introduced an amendment to laws through the Finance Bill 2008-09 to revise electricity tariffs every month under the automatic fuel adjustment formula to pass on the impact of international fuel prices, consumer price index and operation and maintenance costs by replacing the existing system of six-monthly reviews.

As a result, the electricity rates would surge by another 3-4 per cent for all consumers including those of KESC because of the fuel adjustment formula.

Informed sources said the international lenders had expressed their reservations over the imposition of power surcharge to maintain uniform rates on the grounds that existing laws did not restrict the government if it wanted to use revenue collected through surcharge for any purpose other than improving the financial position of the distribution companies. The government, however, insists it is the only way to finance financially weak companies in the transitional period and ensure differential tariff to all companies.