ISLAMABAD: The government has imposed another equalisation surcharge at an average rate of Rs1.5 per unit on consumers of all electricity distribution companies, except K-Electric, with retrospective effect from October 1 that would remain in force until December 31, 2015.

The ministry of water and power issued a notification in this regard on Saturday night, but it was not made public. Dawn has obtained a copy of the notification.

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The government is currently holding talks with the International Monetary Fund (IMF) in Dubai for revival of $6.78 billion bailout package suspended in August, which on successful completion would disburse $1.1bn to Islamabad. Withdrawal of power subsidies is one of the key themes of the IMF package.

A senior government official told Dawn that the decision would yield an additional cumulative revenue of about Rs27 billion to nine distribution companies (Discos) of Wapda. Exactly a month ago, the government had imposed a 30 paisa per unit surcharge on electricity consumers with effect from October 3. This was followed within a couple of weeks by a 52 paisa per unit increase approved by the National Electric Power Regulatory Authority (Nepra) on account of fuel charges.

Under the Nepra law, the government should have reduced consumer tariff by Rs1.5 per unit in April this year but it has been delaying passing on the benefit to consumers. The government can appeal against a Nepra judgment within 15 days of issuance of a notification. On petitions from consumers, the Lahore High Court had held the delay illegal and ordered tariff reduction a few months ago. The government instead withdrew subsidy.

“The federal government is pleased to notify that there shall be levied a surcharge at the rate mentioned against following categories of electricity consumers for electricity sold by …Electric Supply Company, during each of the billing month(s) for maintaining uniform rates of electricity across the country for each of the consumer category in accordance with federal government subsidy policy with effect from 1st October 2014,” said the notification. The reduction in subsidy varies from 24 paisa to Rs1.67 per unit for various consumers of different Discos.

Sources said that based on Nepra determination, the tariffs of all Discos, except Gujranwala and Peshawar electricity supply companies, should have come down by an average of 10pc but the government imposed surcharge for withdrawal of subsidy. Even after withdrawal of whole subsidy, the tariffs of Islamabad and Faisalabad electricity supply companies were estimated to come down, hence the government imposed another surcharge to maintain uniform rates.

For example, a notification for Islamabad utility said: Iesco “shall deposit the amount of this surcharge in a (newly yet to be created fund) the Universal Obligation Fund to be kept in the Escrow Account maintained at the Central Power Purchasing Agency for exclusive use for discharging the liabilities of power producers and surcharge paid under this notification shall be considered as a cost incurred by the distribution company to be included in the tariff determined by Nepra.”

Another notification for Islamabad and Peshawar electricity supply companies further stated that “there shall be levied till the 31st December 2015, an additional charge at the rate of Rs0.10/kwh on the consumption of electricity by every category of electricity consumer except the lifeline domestic consumers”.

Nepra had completed the tariff determination process for nine Discos in February and March this year based on revenue requirements and efficiency standards for the 2013-14 financial year by reducing prevailing tariff by Rs1.5 per unit. The federal government sought Nepra’s reconsideration in July which was found time-barred under the law and hence returned.

When contacted, a water and power ministry spokesman confirmed that a set of notifications had been issued to impose equalisation surcharge but said the government had “the sovereign powers” to withdraw subsidy. He, however, added that practically the existing power tariff would remain unchanged.

He said the government and its Discos had been fighting a legal battle for almost eight months to prevail upon Nepra to provide relief to distribution companies, but had to exercise its “sovereign powers to maintain a status quo” on refusal by the regulator to entertain requests for lenient efficiency standards.

“Yes, the tariff should have been reduced by Rs1.5 per unit as determined by Nepra but the government has withdrawn subsidy to maintain status quo and to ensure uniform rates across the country,” said the spokesman. He said the average tariff for 2013-14 should have been Rs14 per unit that was currently in force but Nepra determined it at Rs12.5 per unit.

This could have created revenue collection problems for Discos, resulting in an increase in circular debt and other financial problems of the federal government.

Published in Dawn, November 3rd, 2014