ISLAMABAD: After having raised gas prices, the PTI government is working on a proposal to increase electricity tariff by an average of Rs2 per unit to partially finance the ever-rising circular debt.

A meeting of the Economic Coordination Committee (ECC) of the cabinet has been called on Tuesday to take up a two-point agenda — electricity tariff and presentation on LNG (liquefied natural gas) terminals — sought by the power division and petroleum division, respectively.

While announcing up to 143pc increase in gas prices last week, Petroleum Minister Ghulam Sarwar Khan had said his ministry was not satisfied with LNG matters finalised by the previous government and “seriously examining” issues relating to LNG terminals.

He said the petroleum ministry, National Accountability Bureau and Federal Investigation Agency were simultaneously and thoroughly working on the subject as one of the two terminals was running on full capacity while the other was operating at below capacity since their inception. He said a report on faults and weaknesses of LNG mechanism would be submitted to the ECC for addressing them.

Report on weaknesses of LNG mechanism to be submitted to ECC tomorrow

A senior official told Dawn that the power division was seeking an approval for implementation of National Electric Power Regulatory Authority’s (Nepra) determination suggesting a gross increase of Rs3.90 per unit in consumer tariff under relaxed benchmarks for ex-Wapda distribution companies (Discos). After taking into account the amount of subsidy earmarked in the budget, the net increase in average consumer tariff has been worked out at about Rs2 per unit with a total impact of Rs200 billion.

Under the Nepra determination for 10 Discos, the average tariff has been increased to Rs15.45 per unit from Rs11.50, following the resolution of all outstanding issues pending before courts or at various levels of settlement or late notifications on account of prior-year adjustments, capacity payments, net hydel profit and additional power purchases.

The overall impact of net hydel profit to Punjab and Khyber Pakhtunkhwa as part of various decisions taken by the Council of Common Interests for the fiscal year 2017-18 was worked out at Rs250bn, but about Rs70bn of that amount was already part of the tariff being paid by consumers.

The regulator has now forwarded a fresh schedule of tariff showing additional tariff requirement for each consumer category for all Discos separately and after adjusting tariff differential subsidy in the budget, the fresh tariff increase for consumers was estimated at Rs2 per unit.

Nepra had concluded on Sept 7 the process of making public hearing on quarterly adjustments for prior-year power purchase prices for the fiscal year 2017-18 when it heard the requests of six distribution companies for quarterly adjustments.

Prime Minister Imran Khan had already given a go-ahead for notification of base tariff increase for Discos on the basis of a briefing given by the power division and Nepra with an impact of about Rs2 per unit or Rs200 billion on the existing power rates.

The regulator had worked out prior-year adjustments for the fiscal year 2015-16 that were notified by the federal government on March 22. The notified determination provides mechanism for quarterly adjustments on account of power purchase price.

Discos had sought prior-year adjustments against capacity payments, operation & maintenance, use of system charges and transmission & distribution losses other than fuel component.

Officials explained that the Nepra-determined tariff for fiscal years 2014-15 and 2015-16 could not be notified by the power division despite a lapse of almost four years. The division and power companies had filed a request for review with higher allowances for theft and losses which was rejected by the regulator. The government challenged the decision in the court which remanded the case back to the regulator with a directive to resolve the matter.

The regulator delivered its determination in October last year as desired by the power division, but a final tariff could not be notified as the then government shied away from taking a political decision so close to the elections that it had been insisting for over three years through amendments to the Nepra ordinance.

During a recent presentation by the power division, the ECC was given a rundown on the impact of industrial support package, Azad Jammu and Kashmir’s subsidised units, Balochistan agricultural tubewells and Fata receivables, as well as the impact of the existing time lag on tariff determination mechanism of Nepra.

The ECC had decided that there was no reason to keep sitting on the tariff determination and more so when it was providing relief in cash flows to the power sector marred by circular debt.

In the process, all Discos suffered financial losses — including the electric supply companies of Islamabad, Lahore and Faisalabad that were in profit until two years ago and placed in the privatisation list through capital market listings, but later withdrawn because of negative balance sheets.

Published in Dawn, September 24th, 2018

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