ISLAMABAD: The Water and Power Development Authority (Wapda) has sought a Rs1.50 per unit increase in tariff to facilitate the payment of Rs70 billion to Khyber Pakhtunkhwa on account of the Net Hydropower Profit (NHP) settlement.

In its petition to the National Electric Power Regulatory Authority (Nepra), Wapda said it had been instructed by the federal government to raise Rs25bn as loan from banks and add Rs1.875bn as mark-up before charging consumers for the first instalment during the current fiscal year.

Meanwhile, Nepra and Wapda have developed differences over the exact tariff increase. Both sides, however, refused to comment on the issue on record. A senior Wapda official said that the 31 billion units of hydroelectric power would be costlier by Rs1.20 per unit while a Nepra official said the increase demanded by Wapda was Rs1.50 per unit.

A clear picture would emerge once Nepra takes for public hearing the Wapda’s request for tariff increase on May 5.

Under an agreement signed by the federal and KP governments and approved by the Council of Common Interests (CCI), Wapda would clear the payment of Rs70bn net hydropower profit to the province in four years.

Wapda informed the regulator that given the fact that the first instalment of Rs25bn could not be charged to the consumers due to time constraints, the government had directed Wapda to raise a Rs25bn loan from banks at 7.5pc for one year, translating into a mark-up cost of Rs1.875bn.

Wapda said past arrears of Rs15bn payable in 2016-17 should also be approved to ensure recovery through a tariff increase during 2016-17.

This petition came in the wake of a formal memorandum of understanding (MoU) signed by Water and Power Minister Khwaja Muhammad Asif, Finance Minister Ishaq Dar and Khyber Pakhtunkhwa Chief Minister Pervez Khattak on Feb 25 and subsequently approved by the CCI on Feb 29.

Under the MoU, the two sides decided that the uncapped NHP as determined by Nepra on the request of the KP government and the ministry of water and power would be notified immediately by the ministry.

A total amount of Rs70 billion was agreed on account of arrears of uncapped NHP after reconciliation of mutual claims in the power sector between the two governments as a full and final settlement. It was agreed that Wapda, after seeking concurrence of the CCI through the Ministry of Water and Power, would file a tariff petition for recovery of arrears from power consumers across the country.

The recovery from consumers and payments to KP was required to be made in four instalments, with the first instalment of Rs25 billion to be paid during 2015-16 and the remaining amount in equal instalments of Rs15 billion each over the next three years.

In November 2015, Nepra had an approximately 217 per cent increase in the Net Hydel Profit (NHP) to Khyber Pakhtunkhwa while escalating the sale price of cheaper hydropower by around 16 per cent. As a consequence, the KP government would now be entitled to around Rs19 billion NHP annually as compared to the Rs6bn in previous years.

Published in Dawn, April 29th, 2016