ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) allowed on Wednesday an increase of Rs3.40 per unit (about 83 per cent) in bulk hydropower tariff for Water and Power Development Authority (Wapda) to generate additional revenue of Rs119 billion.

The power regulator held that the major increase was necessitated by a decision of the Council of Common Interests (CCI) to pay more than Rs86bn arrears to Khyber Pakhtunkhwa (Rs24.3bn) and Punjab (Rs62bn) on account of net hydropower profit (NHP).

The remaining Rs33bn was also required for the payment on account of NHP at the rate of Rs22bn per annum to KP for Tarbela generation and Rs10bn to Punjab for Ghazi Barotha generation.

Wapda had sought Rs88.3bn worth of arrears payable to the two provinces for 2017-18, but the regulator worked it down to Rs86.2bn. Likewise, Wapda had demanded Rs33.027bn annual regular payments to the two provinces, but Nepra worked it down to Rs32.9bn.

Nepra officials declined to comment on record as to how much tariff increase had been made, saying that the previous practice of average tariff setting had been given up. As a shift in policy, Nepra has now set separate tariffs for all 21 hydropower plants, they said.

An official, however, explained that the existing overall Wapda tariff of about Rs4.05 would go up to about Rs7.45 per unit, showing an increase of almost 83pc. He said the annual hydropower production had been estimated at about 33,600 gigawatt hours (GWh) that would generate Rs119bn in additional revenue.

Wapda has an existing generation capacity of about 7,000 megawatts, or almost one-third of the country’s total power generation. This generation is estimated to go beyond 20,000MW in a few years.

The major increase in the tariff had been necessitated because of the federal government’s agreements with the provinces for the guaranteed payment of net hydropower profit on account of cost plus hydel levies margin, commonly known as net hydel profit (NHP).

In November last year, the federal government had directed Wapda to pay the Punjab government Rs82bn as NHP for power generated by the 1,450MW Ghazi Barotha hydropower project (GBHP) since 2005.

Of this, Rs38bn has been settled upfront through the issuance of a one-year promissory note and the remaining Rs44bn is payable in the next three fiscal years at the rate of about Rs14.5bn per year. Wapda will continue to pay Rs9.5bn to Punjab every year for the productive life of the project.

The same settlement was earlier reached in February 2015 with the KP government in the matter of Tarbela Dam. The two provinces were originally required to be paid NHP at the rate of Rs1.10 per unit, which has now been indexed up at Rs1.16 per unit.

The regulator said the NHP was payable on the basis of decisions of the CCI, which is the ultimate authority under the Constitution, and has to be generated through Wapda’s cost of generation and passed on to consumers.

The regulator noted that it was abundantly clear under Article 161 (2) of the Constitution that computation of NHP will be in accordance with a rate to be determined by the CCI exclusively.

Nepra said the Kazi Committee Mechanism (KCM) under which NHP was originally calculated for KP was not sacrosanct. “The CCI itself has approved other methodologies for calculating NHP and invalidated the KCM from time to time”.

Based on the latest Nepra determination, the federal cabinet is expected to approve the tariff increase for recovery from consumers as the provinces have been raising the issue of non-payment of NHP at the level of CCI and Inter-Provincial Coordination Committee.

At a recent meeting, the power division had “expressed inability to release NHP to KP and Punjab as the notification of the tariff had not been issued and recoveries from distribution companies were awaited”.

Published in Dawn, November 23rd, 2017