ISLAMABAD: Because of falling oil prices in international market, the National Electric Power Regulatory Authority (Nepra) reduced on Monday electricity tariff by 48 paisa per unit for all distribution companies, except K-Electric.

The decision was welcomed by Prime Minister Nawaz Sharif who took credit for a procedural change which led to the tariff reduction.

Nepra took the decision after a public hearing presided over by its Vice Chairman Habibullah Khilji on a petition filed by the Central Power Purchase Agency on behalf of the distribution companies. The reduction has been made under automatic fuel adjustment for power generated in October.

Last month, Nepra had approved an increase of 53 paisa per unit because of adverse fuel mix under the same formula. The fuel mix in Oct was worse than in Sept but a major cut in oil prices led to tariff reduction.

Fuel price adjustments are made every month to pass on the impact of actual fuel cost for power generation to consumers.

Estimated at Rs4 billion, the reduction in tariff will be passed on to consumers in the billing month of Dec. But the tariff will remain unchanged for lifeline consumers using less than 50 units per month and for consumers of K-Electric.

It was said at the Nepra hearing that about 38.5 per cent of power generated in Oct came from hydro resources with no fuel cost.

This was followed by 33.4 per cent contribution by plants using furnace oil with the fuel cost of Rs15.64 per unit.

Power generation from gas-based plants further went down in Oct because the government diverted the cheaper resource to captive power plants of industrial sector. The plants contributed about 18.3 per cent to the power supply in Oct against their 20.56 per cent share in Sept.

The meeting was told that gas-based plants produced electricity with the fuel cost of Rs4.3 per unit. About 4.85 per cent of electricity was produced by nuclear power plants with the fuel cost of Rs1.2 per unit.

About 2.95 per cent of electricity was generated by diesel-based power plants with the fuel cost of about Rs20.3 per unit.

As a consequence, the actual fuel cost of power generation in Oct stood at Rs7.06 per unit against the reference price of Rs7.546 per unit, necessitating the tariff reduction of 48 paisa per unit.

Published in Dawn, November 25th , 2014