ISLAMABAD: With talks with the International Monetary Fund (IMF) in progress in Dubai, the National Electric Power Regulatory Authority (Nepra) postponed on Thursday public hearing on a Rs3.20 per unit reduction in electricity tariff to facilitate the government.

Informed sources told Dawn that the ministries of finance and water and power were trying to persuade Nepra to retain about Rs1.50 per unit reduction in the fuel price adjustment (FPA) and pass on the remaining Rs1.70 reduction to the consumer in the billing month of February in line with policy guidelines issued by the Economic Coordination Committee of the cabinet last week.

Since it was not legally possible for Nepra, the way out was found in the shape of postponing the hearing.

The sources said that since Nepra had also rejected similar policy guidelines in the past, the ministries of finance and water and power, in consultation with the law ministry, had decided to impose ‘equalisation surcharges’ to meet financial targets agreed with the IMF.

The government had imposed 30 paisa per unit surcharge in October, an average 42 paisa (ranging between 50 paisa and Rs1.50 per unit for various companies) in November and 60 paisa in December, instead of passing on the full impact of FPA reduction to consumers. For example, Nepra had approved Rs2.97 per unit reduction in FPA for the billing month of December, but the government announced that it would retain 60 paisa per unit and pass on Rs2.37 to the consumer.

However, the equalisation surcharges were challenged in the high courts of Lahore and Peshawar, which issued interim restraining orders. Consequently, power distribution companies had to pass on the entire Rs2.97 reduction to consumers in the current month’s bills.

This has caused difficulties for the finance ministry in the current talks with the IMF in Dubai on the sixth review of the $6.78 billion bailout package and a consequential $560 million disbursement by the end of March.

Early this week, the Central Power Purchase Agency (CPPA) had requested Rs3.20 per unit reduction in monthly FPA. This would have given a relief of Rs20 billion to consumers.

Nepra had fixed Jan 29 for a public hearing on the matter.

When stakeholders and interested parties reached Nepra to attend the hearing, they were informed about the postponement.

Nepra’s registrar said the hearing scheduled for Thursday had been cancelled because of “commitments of an urgent nature of the authority (Nepra) that were beyond control”, but declined to explain these. He only said Nepra regretted inconvenience caused to all those interested in the hearing.

The finance ministry’s spokesman, Rana Assad Amin, did not return calls seeking comment, while the power ministry’s spokesman Zafar Yab Khan said Nepra was an independent body.

An official close to Nepra said the FPA mechanism was a clearly notified document describing all aspects of fuel cost to be adjusted in monthly bills and it could not be changed suddenly on the orders or requests of any institution.

Any change has to take place through a lengthy process involving legal formalities and deliberations. He said that even if ECC’s policy guidelines were considered legally binding to get rid of circular debt, the government’s request to include tariff for Azad Kashmir, line losses and interest payments required to be considered for the base tariff would come under review in March and under FPA that was an actual pass through cost of fuel every month.

On Monday, the CPPA had requested the regulator to reduce fuel-based power charges for a month by Rs3.20 per unit because of extensive loadshedding in December. It reported that Nepra had approved reference fuel tariff for December at Rs9.53 per unit last year when furnace oil prices were in the range of Rs75,000 per ton, which have now come down to about Rs40,000 per ton.

As a result, the actual fuel cost of power generation has declined to Rs6.32 per unit, requiring a Rs3.20 per unit reduction in FPA.

Published in Dawn, January 30th, 2015

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