ISLAMABAD: Electricity tariffs for all distribution companies (Discos), except K-Electric, are expected to come down by Rs1.86 per unit for this month due to higher than justified billing to consumers in December despite cheaper generation cost.

According to a petition filed by the Central Power Purchasing Agency (CPPA) before the National Electric Power Regulatory Authority (Nepra), distribution companies had overcharged consumers by 23 per cent in December under a presumptive reference tariff.

The reduction in actual generation cost was mainly because of better energy mix, significantly greater contribution from domestic sources of energy — hydropower and natural gas — when compared with expensive imported fuels.

The CPPA said the actual generation cost was lower and hence extra money collected from consumers needs to be refunded through adjustment in the next billing month under automatic fuel pass through mechanism.

Nepra, which was placed under the administrative control of the Ministry of Water and Power last month instead of the cabinet division through an executive order of the prime minister, has set January 26 as the date for public hearing to take up the request for tariff reduction.

Under the practice in vogue, distribution companies are charging higher estimated fuel charge to power consumers that is later adjusted against actual cost in a subsequent month with Nepra’s approval.

The CPPA claimed that it sold about seven billion electricity units (kilowatt hours) to consumers in Dec 2016 at a total cost of Rs37bn at an average cost of Rs5.13 per unit. It said the power companies had charged reference fuel charges of Rs8.104 per unit to consumers while the actual fuel cost came out at Rs6.24 per unit. Therefore, a refund of Rs1.86 per unit was required to be passed on to the consumers.

The CPPA reported that highest contribution – almost 37pc (2.67 billion units) power generation – came from furnace oil based plants at a rate of Rs8.65 per unit. Hydropower plants having no fuel cost at all contributed about 23pc (1.64bn units). The second largest power generation of about 27pc (1.86bn units) was based on domestic natural gas at the rate of Rs5.3 per unit. As a consequence, these two domestic sources together contributed almost 50pc of energy.

Another cheaper source of power generation was nuclear fuel at 60 paisa per unit and its contribution was about 6pc or 441 million units.

Likewise, power production from regasified-liquefied natural gas (RLNG) contributed about 4.1pc share or 296m units at an average cost of Rs7.04 per unit. Another saving was on account of about 0.9pc power generation from high speed based that cost Rs12.04 per unit.

The proposed reduction in power tariff would not be applicable to all agricultural and domestic consumers using less than 300 units per month under a decision of the PML-N government that this was already a subsidised segment of population. The consumers of K-Electric in Karachi and adjoining areas would also not enjoy the relief.

On Thursday, KE demanded a 40-paisa per unit increase for fuel adjustment charges. Nepra will decide the fate of this request at a hearing which will be held later this month in Islamabad.

Published in Dawn, January 21st, 2017