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Consumers charged higher than actual fuel cost

Updated February 19, 2018

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ISLAMABAD: Power distribution companies charged about Rs3 per unit higher than the actual fuel cost in January as a petition has been filed in the Natio­nal Electric Power Regu­la­tory Authority (Nepra), seeking approval of fuel adjustment for a month.

In its petition, the Central Power Purchasing Agency-Guarantee (CPPA-G) repor­ted to Nepra that it had charged a higher reference tariff of Rs9.867 per unit in January but actual fuel cost turned out to be Rs6.90 per unit. Therefore, it said, there was a legal requirement to return Rs2.98 per unit to consumers.

The regulator is expected to hold a public hearing on the matter on Feb 22.

A relief in electricity rates for one month will not be applicable to residential and agricultural consumers with less than 300 units of monthly consumption as per decision of the PML-N government on the grounds that they are already being provided subsidised electricity and do not qualify for monthly fuel price cut.

It is a common practice that distribution companies charge power consumers significantly higher estimated fuel charge which is later adjusted against the actual cost in a subsequent month with the approval of the power regulator. The practice helps power companies generate billions of rupees as windfall from consumers in advance and have better cash flows without financing costs.

The CPPA-G informed the regulator that about 7,982 GWh (gigawatt hours) electricity was generated in January and 7,698 GWh could be delivered to distribution companies due to about 3.41 per cent losses in the transmission system. It said hydropower generation was too low because of canal closure on top of overall low water availability. The cheapest energy source (hydropower) had a total contribution of just 7.6pc in overall electricity supply, compared to 15.86pc in December.

The hydropower generation has a zero fuel cost. The country’s can­als are routinely closed for maintenance and repair every year for more than a month, usually from Dec 25 till Jan 31. Hydropower turbines become redundant during this period. Also, the wind and solar plants toge­ther contributed about 3.1pc energy with no fuel cost.

Furnace oil-based power plants contributed about 20.4pc electricity to the nat­io­nal grid in January, down from its 29pc share in Dece­mber and 9pc in November. The furnace oil-based generation cost increased to Ra10.42 per unit from Rs9.8 a month ago due to higher oil prices.

The natural gas-based generation maintained its contribution to overall power generation at 23pc in January. The fuel cost was worked out at Rs4.63 per unit, slightly higher than Rs4.49 in December.

However, power production from imported liquefied natural gas (LNG) surged significantly with almost 21pc share in the total supply as compared to a paltry 5.1pc and 9.3pc shares in December and November, respectively. The re-liquefied LNG-based power generation cost surged to Rs9.25 per unit in January from Rs6.33 in December.

The share of coal-based generation was reported at 14.34pc in January against 11.7pc in December and 13.4pc in November. Its fuel cost increased to Rs5.2 per unit in January from Rs4.3 in December

The price of electricity imported from Iran stood at Rs11.05 per unit.

In January, about 7,982 GWh electricity was generated at a total cost of Rs48.58 billion or Rs6.086 per unit, while 3.4pc lower supply was delivered to distribution companies at a cost of Rs53.04bn or Rs6.90 per unit.

As the actual generation cost was lower than it had already charged in connivance with the regulator, extra money collected from consumers would have to be refunded through adjustment in the next billing month.

Published in Dawn, February 19th, 2018