Govt to recover all circular debts through consumer tariff

Published June 27, 2015
Nepra) approved a reduction of Rs2.62 per unit in fuel price of electricity tariff but decided to withhold 76 paisa per unit to recover Gas Infrastructure Development Cess. —AFP/File
Nepra) approved a reduction of Rs2.62 per unit in fuel price of electricity tariff but decided to withhold 76 paisa per unit to recover Gas Infrastructure Development Cess. —AFP/File

ISLAMABAD: The government and regulators have decided to settle all outstanding gas receivables and electricity circular debt against lower international fuel prices instead of directly benefiting the consumers.

On Friday, the National Electric Power Regulatory Authority (Nepra) approved a reduction of Rs2.62 per unit in fuel price of electricity tariff but decided to withhold 76 paisa per unit to recover Gas Infrastructure Development Cess (GIDC).

As a consequence, Nepra allowed Rs1.86 per unit reduction in tariff on account of monthly fuel adjustment for April.

This reduction would not be available to consumers using less than 300 units a month as, under a recent decision, the government felt these consumers were already getting subsidised electricity.


Power rates cut by Rs1.86 per unit


The government has committed with the International Monetary Fund to ensure recovery of Rs145 billion from consumers on account of GIDC during the outgoing fiscal year and wipe out power sector circular debt in three years through tariff adjustments.

At a public hearing presided over by Nepra Chairman Tariq Sadozai, the regulator allowed electricity companies to about Rs11bn GIDC arrears in instalments from the power consumers. The recovery of GIDC imposed in last year’s budget had been stayed by various high courts on different grounds and finally cleared by the Supreme Court of Pakistan.

The Central Power Purchasing Agency (CPPA) requested Nepra to reduce power tariff by Rs2.62 per unit on account of fuel adjustment for April. Nepra noted that it was an appropriate time that recovery of GIDC adjustment be made in consumer tariff as lower fuel prices would help reduce electricity cost.

Therefore, it imposed 76 paisa per unit GIDC on gas to be used as fuel by power producers to recover Rs11bn in instalments in April, May and June that would be made part of bills for August and September.

The remaining relief of Rs1.86 per unit would be passed on to consumers in the billing month of August. The rate cut will not apply to K-Electric consumers.

The CPPA told the public hearing that 7.17bn units were sold to power distribution companies at a cost of Rs45.2bn in April. The transmission losses stood at 2.19 per cent. The reference fuel price was Rs8.92 per unit which was recovered from consumers in April but actual cost worked out at Rs6.30 per unit because of lower fuel prices and better energy mix.

The share of hydropower generation was 20.06pc, furnace oil 39.32pc, gas 26.7pc, coal 0.18pc, HSD (high speed diesel) 5.06pc and nuclear 5.88pc. The cost of furnace oil-based generation came out at Rs9.86 per unit, HSD at Rs13.85, natural gas Rs5.18, coal Rs4.49 and nuclear power Rs1.18. Hydropower generation did not have any fuel cost component.

In a related decision, Nepra allowed power firms to burden consumers with Rs11bn arrears on account of GIDC following the passage of GIDC Bill 2015 by parliament after its clearance from the apex court.

The power regulator believed that it would be adjusted to absorb the impact of falling oil prices in future fuel price adjustments and, therefore, consumers would not feel additional burden.

The tariff for gas-based power plants would go up by Rs4.3 to Rs4.5 per unit for the recovery of Rs11bn arrears from the consumers.

Engro Powergen Qadirpur Limited (EPQL) filed a petition before the Nepra against GIDC Act 2015 pleading that the demand raised by SNGPL (Sui Northern Gas Pipelines Limited) for recovery of GIDC due from 2013 to May 2015 in lump sum cannot be met because the petitioner had never recovered it from NTDC (National Transmission And Despatch Company), the sole purchaser of the electricity produced by EPQL.

Fauji Kabirwala’s power plant also requested that GIDC should be treated as a change in law and allowed as pass-through in tariff. GIDC adjustment was allowed in case of five IPPs — Engro Foundation, Saif, Sapphire, Orient and Halmore.

It was further pleaded that the recovery could not be affected as Nepra had not revised the tariff of the petitioner to factor in GIDC due to various restraining orders passed by different high courts. The distribution companies were to recover the same from electricity consumers. Therefore, the situation had been complicated and court directed the power regulator to look into this matter.

The cess was imposed by the previous government of Pakistan Peoples Party (PPP) to raise funds for gas import projects like Iran gas pipeline and LNG import. The government has collected Rs94bn so far. But the money was not used for these projects and this cess was turned down even by the Supreme Court on technical grounds.

The present government has succeeded to get the GIDC bill 2015 passed from parliament to legalise already collected Rs94bn and to collect arrears from the gas consumers.

The SNGPL had also asked gas-based independent power producers to pay arrears but the EPQL moved to court and Nepra has now decided to recover Rs11bn arrears from the power consumers on account of fuel adjustments. The share of gas-based plants is around 22pc.

Nepra increased gas price for power plants by Rs100 from Rs488.23 per million British thermal units (mmbtu) to Rs588.23 per mmbtu on account of GIDC.

Published in Dawn, June 27th, 2015

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