ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) on Monday concluded a hearing of pre-privatisation multiyear tariff for Faisalabad Electric Supply Company (Fesco), seeking an increase of Rs1 to Rs4.91 per unit in consumer tariff in the first year.
Under the government policy, the ex-Wapda distribution companies are required to secure multi-year tariff ahead of their upcoming sale transactions for encouraging private investors on the pattern of Karachi Electric Supply Company (KESC) whose majority shareholding, along with management control, were privatised about a decade ago.
The Fesco’s five-year tariff, among other things, seeks tariff increase ranging between Rs1 and Rs4.91 per unit for first year ie fiscal year 2015-16. It has proposed an average 58 paisa per unit increase for the second year (2016-17) and six paisa to 17 paisa per unit increase in subsequent three years – up to fiscal year 2019-20.
The Nepra hearing, presided over by its chairman Tariq Sadozai, seemed dissatisfied with loss reduction programme of the company that envisaged only 1.16 per cent reduction in its system losses. Mr Sadozai also expressed concern over undocumented transfer of Rs13bn by Fesco to Central Power Purchasing Agency (CPPA) last fiscal year over and above the cost of power purchase.
On questioning, the representatives of the Fesco told the Nepra that the amount was transferred to the CPPA on the instructions of the Ministry of Water and Power asking the distribution companies to surrender specific amounts to the CPPA.
Mr Sadozai wondered how the ministry could direct a regulated entity to transfer its funds to another regulated entity and directed the Fesco to submit a copy of the directive to the regulator for examination and a decision.
The regulator expressed concern that the Privatisation Commission despite being a major stakeholder to the power companies on the sale list did not attend the hearing that would have far-reaching impact not only on consumers and power sector but also on the privatisation process.
The Nepra chairman said the regulator would like to know how and where the Rs13bn would be accounted for once the Fesco was sold to the private sector.
He also asked the Fesco and the company to explain with documentary evidence how the payment of subsidy to a private entity would come to an end as envisaged under the privatisation programme or if the Fesco would continue to get the tariff subsidy from the government even after the privatisation.
This was based on data that suggest the Fesco’s transmission and distribution losses at 10.9pc during current year would stand at around 9.98pc in 2019-20.
Against this, the company’s power purchase cost may increase from Rs113.6bn in the current year to Rs151.6bn in 2019-20.
The average power purchase cost would increase from Rs10.66 per unit now to Rs11.06 per unit five years down the road.
The company’s average sale rate at Rs12.209 per unit now would go up to Rs12.8 per unit next year and end up at Rs13.171 per unit after five years.
The regulator also seem dissatisfied with negligible loss reduction in the last two years of the five-year tariff period.
Published in Dawn, September 22nd , 2015
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