ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) on Friday approved an across-the-board Rs1.95 per unit (15pc) increase in tariff under uniform tariff regime though it questioned the justifications on technical and legal basis.
For the first time in almost two decades, the rate for lifeline consumers — using up to 50 units per month — has therefore also increased, to Rs3.95 per unit from the existing rate of Rs2 per unit, as the application of Rs1.95 per unit is for all consumers.
The tariff increase was immediately notified by the Power Division, which said the tariff increase was also applicable to Karachi Electric to maintain uniform rates across the country.
The Nepra decision is based on the federal cabinet’s directives of Jan 15 that had approved a tariff increase of Rs1.95 per unit along with targeted tariff differential subsidy of Rs185 billion under Section 31 (4) of the Nepra Act. The tariff increase would ensure the earning of about Rs200 billion by power distribution companies (Discos).
This is the third increase in tariff determined by the regulator in as many days. On Feb 10, the regulator allowed Rs1.54 per unit monthly fuel cost adjustment to be charged this month. This was followed by 83 paisa per unit increase on Feb 11 on account of quarterly tariff adjustments.
The government told the regulator that it had adopted guidelines to structure the discretion for arriving at uniform tariff, being reflective of economic and social policy of the government and based on the consolidated revenue requirement determined by the regulator for Discos at Rs1.681 trillion for fiscal year 2019-20.
Protection of low-end consumers
It said the uniform tariff regime was based on socio-economic objectives, budgetary targets in field, protection of low-end consumers from price escalation through provision of subsidy and maintaining uniform tariff across the country for each consumer category.
It said the government in the past had been using various surcharges like equalisation surcharge and financing cost surcharge etc but those powers had come to an end after the Nepra Act was amended in 2018. A new uniform tariff framework has been introduced under Section 31(4) in their place, which includes both the price equalisation and socio-economic elements of the previous regime, price equalisation by the uniform, cross-entity nature of the tariff itself and the socioeconomic dimension by tying grant of tariff to public consumer interest.
“From their application, it is apparent that the Federal Government is employing the new Uniform Tariff framework in an analogous manner to the previous surcharge and subsidy framework, by seeking to incorporate subsidies into the uniform tariff, to achieve price-equalisation between Discos consumers, and to fulfill other socio-economic objectives under policy”, the Nepra noted.
The regulator said the government had incorporated energy subsidies within the uniform tariff, non-determination of which would lead to the impoverished consumer category to suffer from detrimentally inflated energy prices. Further still, non-notification of revised or rebased tariff would result in huge quarterly adjustments leading to increase in circular debt, “which is not in the interest of the consumers and would adversely affects the economy of the country”.
“These are grave and inescapable consequences attached to the Uniform Tariff being sought,” the regulator said, adding that “in view of these pragmatic considerations, it would be inequitable and imprudent for the Nepra to dismiss the Uniform Tariff motion on the basis of non-exhaustive compliance of the procedural elements of Section 31(4)”.
Moreover, mitigation of these adversities was in the interest of public consumer, the regulator said.
It also pointed that the government had not submitted consolidated accounts, rather had consolidated the individual determined revenue requirement of all Discos so that the same was reflective of the consolidated accounts for the purpose of tariff setting. The regulator said it was allowing the tariff increase for the fact that after the amendment to the Nepra Act, the relevant bodies were going through a transition phase for devising and enacting required frameworks and subordinate legislations.
Published in Dawn, February 13th, 2021