Federal Minister for Finance Dr Abdul Hafeez Shaikh chairing the meeting of the Committee constituted by the Prime Minister to look into the issues relating to load shedding debt and other matters pertaining to power sector on Wednesday. – Photo by APP

ISLAMABAD: With the National Electric Power Regulatory Authority (Nepra) set to increase power tariff by about Rs2 per unit (around 22 per cent) to pass on to consumers the impact of higher fuel prices, the government is preparing to introduce a set of energy conservation measures, including two weekly holidays and early market closure.

The conservation measures, along with a proposed additional 15 per cent increase in electricity tariff, would be discussed on Thursday when Prime Minister Yousuf Raza Gilani will take up recommendations of the special committee on energy crisis and circular debt headed by Finance Minister Dr Abdul Hafeez Shaikh.

Sources said Nepra held a public hearing on Wednesday at the request of the Central Power Purchase Agency on behalf of Wapda’s distribution companies to pass on the impact of the rise in international fuel prices during July to consumers.

Although the power regulator did not announce its determination on fuel price adjustment, the sources said its internal calculations suggest the power rates would have to be increased by about Rs2 per unit to recover the full cost of fuel. They said furnace oil-based energy purchase price increased from Rs14.75 to Rs15 per unit, while diesel-based purchase surged from Rs15.63 to about Rs18 per unit because three independent power producers were forced to run on diesel as an alternative fuel owing to shortage of gas.

The sources said the ministry of water and power was pushing for two weekly holidays on a permanent basis – even in winter – starting from the current month and market closure after evening.

The water and power ministry estimates a saving of 250MW on account of two weekly holidays and about 300MW on early market closure.

According to the sources, the special committee is also seeking about 15 additional increase in electricity rates to recover full cost of generation, distribution and transmission, including about 20 per cent of system losses, from honest and paying consumers.

This is being seen by some members of the committee as the only way out of the current circular debt problem that has led to the most severe supply problems in the energy sector, putting a large part of the country’s corporate sector on default. It will, however, be a difficult political decision for the prime minister to penalise honest consumers who are already burdened by high electricity tariff, which has been increased by almost 125 per cent in about 18 months.

At the same time, the committee understands that stringent penalties against power theft and a system of check and balance in the management of power companies could reduce electricity losses.

The sources said the special committee was also proposing the passing on to consumers the interest payments by independent power producers to bank financing in arranging fuel in the absence of smooth payments by state-run power companies and late payment surcharge payable by power companies on account of their arrears.

Nepra is against these additional items in the electricity tariff on the premise that consumers should not be made to pay for the inefficiency and mismanagement of the government and power companies.

The special committee, however, wants a policy directive after approval by the prime minister or the cabinet to compel the regulator to pass on these items to consumers, arguing that someone has to pick up the additional cost and generate additional funds to pay off a chronic debt problem contributing to serious electricity loadshedding throughout the year.

An official said one of the options to end the circular debt was to increase power tariff by a small percentage every month to generate additional revenue. He said another option was more gas supplies to the Karachi Electric Supply Company to contain its rising cost of generation.

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