ISLAMABAD: In line with a commitment it made with the International Monetary Fund (IMF), the National Electric Power Regulatory Authority (Nepra) on Wednesday allowed the federal government to re-impose three surcharges on electricity consumers.

The three surcharges amounting to Rs1.55 per unit would be charged to consumers paying their bills regularly to finance Rs110 billion worth of theft, system losses and non-recovery of power companies.

While allowing the surcharges, the regulator noted that its hands were tied under the law to allow them as decided by the federal government under section 31(5) of the Nepra law but said the existing tariff would remain unchanged.

Nepra allows decision under commitment made to IMF

Two of the surcharges are the Neelum-Jhelum Surcharge at a rate of 10 paisa per unit, aimed to generate about Rs7.5bn per annum, and Financing Cost Surcharge at a rate of 43 paisa per unit, to ensure collection of Rs30-32bn for debt servicing of the Power Holding Private Limited.

The third surcharge, namely the Tariff Rationalisation Surcharge, levied at an average rate of Rs1.02 per unit is meant to reduce overall power subsidy on the budget and to keep the tariff uniform across the country through cross-subsidy. This would vary from one distribution company to another and yield about Rs70bn per annum.

The regulator confirmed that the Lahore High Court had termed these surcharges unconstitutional on May 29, 2015, but the judgement was challenged by the federal government before the Supreme Court of Pakistan and the operation of the high court’s verdict had been suspended. It said similar petitions were also pending against surcharges before high courts in Khyber Pakhtunkhwa, Islamabad, Balochistan and Sindh, but explained that since the distribution companies were parties before the respective high courts they would have to follow court orders.

Talking about the merits and demerits of levying of surcharges, the regulator said that “Nepra has not levied any of such surcharges; rather it is the federal government which has the statutory power to do the same. Nepra has only been requested to simply indicate the amount of such surcharges imposed by the government in schedule to tariff for the purposes of recovery...”.

Under section 31(5) of the Nepra Act, 1997, the federal government had the power to levy any surcharge and any such surcharge was to be considered as a cost to be included in the tariff determined by Nepra, the regulator said.

Nevertheless, the regulator also put on record that despite government’s powers, it considered revenue shortfalls a result of inability of the distribution companies to recover the determined tariff. “The Financing Cost Surcharge is a burden on the paying consumers as a result of inability of the Discos to realise the full amount. This also incentivises Discos to underperform,” Nepra noted.

The regulator said the interveners and affected groups should approach the federal government for the redressal of their concerns over the surcharges.

An official explained that continuation of the three surcharges would not increase current tariff but would deprive the consumers a legitimate tariff reduction determined by the regulator over the past two years.

Published in Dawn, March 22nd, 2018