ISLAMABAD: As the power regulator ordered the refund of Rs4.35 per unit to consumers, ex-Wapda distribution companies on Wednesday made an extraordinary demand: let them utilise this money for up to six months to improve their cash flows.

The unusual demand came at a public hearing conducted by the National Electric Power Regulatory Authority (Nepra). It also carried an underlying warning of enhanced loadshedding, particularly in Ramazan, if funds overcharged to consumers were returned immediately.

At the same time, Nepra Chairman Tariq Sadozai, who presided over the hearing, deplored that the authorities concerned were not fully utilising the generation capacity available with them while consumers suffered long hours of loadshedding.

For example, he said, Independent Power Producers (IPPs) were being operated at half their capacity. He said Nepra was taking up the matter at the highest level of the government.

Ex-Wapda distribution companies wanted to withhold refund payments to improve cash flows

Rehan Akhtar of the Central Power Purchasing Agency (CPPA), which had filed requests for monthly fuel adjustments for February and March on behalf of Ex-Wapda distribution companies, requested Nepra to take note of the critical fuel stocks of IPPs and other power plants and delay the refund to consumers for a couple of months or stagger it for four to six months.

“Do you think it is the legitimate way of building fuel stocks?” quipped Nepra member Himayatullah Khan. “Don’t you think the authority has to operate under the law, rules and regulations or you expect us to adopt the managerial role of the executive and manage fuel stocks?” he said.

Interestingly, the regulator has already taken notice of two-month delay in the refund of higher tariff to consumers involving an amount of about Rs33bn utilised by power companies. A separate legal process is currently going on to impose a penalty on Discos.

The Nepra chairman said it was strange that the power companies had collected higher funds from consumers and utilised them beyond a legal framework instead of making refunds within time. Yet they were demanding that they should be allowed to use the money for another three to four months, he said. “The demand being illegal is disallowed,” he ruled while presiding over a full five-member bench of Nepra.

Mr Sadozai also ordered with the consensus of all members that the two-month fuel price reductions be merged and passed on to consumers in one go in the coming billing month of May with a total financial impact of about Rs33bn.

This included a refund of Rs2.15 per unit on account of actual fuel cost savings in February worth Rs16bn against a higher reference fuel tariff of Rs7.268 per unit. The actual fuel cost was calculated at Rs5.11 per unit. Another Rs2.20 per unit refund was worked out for the actual fuel cost in March, involving about Rs17bn against the reference fuel cost of Rs8.098 per unit, which actually stood at Rs5.89 per unit.

Under the practice in vogue, distribution companies are charging significantly higher estimated fuel charge to power consumers that is later adjusted against the actual cost in a subsequent month with the approval of the power regulator. Delay in the submission of monthly adjustment requests attracts fines and penalties under the tariff standards and procedure rules.

The Nepra case officers reported that a major saving of Rs8.7bn in February and Rs12bn in March were mainly because of lower prices of furnace oil, diesel and natural gas. For example, the furnace oil price was assumed at Rs65,000 per tonne for the reference tariff but actually stood at Rs41,000-42,000 per tonne. The diesel price was assumed at Rs93 per litre against the actual rate of Rs60. Likewise, the natural gas price also came down to Rs500 per unit against Rs634 assumed for the reference tariff. The remaining saving of Rs6bn in February and Rs5bn in March were on account of better energy mix than earlier projected.

It was reported that power companies were claiming Rs9 per unit fuel cost for the Nandipur project even though Nepra had determined its reference tariff at Rs4.95 per unit in January. But it was never notified by the government. The regulator criticised the authorities for holding back the tariff notification, but observed that it would allow about 38 paisa per unit higher fuel cost for Nandipur.

Mr Sadozai observed that the Nandipur fuel cost was assumed on the lower side in January last year, which had now gone up with an accumulated impact of Rs2.4bn. It has to be passed on in tariff on a provisional basis to avoid a sudden impact on consumers at the time of notification, he added.

The regulator deplored that distribution companies retained the financial benefit of around Rs33bn by holding back extra money collected from consumers for an extended period of time to meet their cash flow requirements.

Published in Dawn, April 27th, 2017