ISLAMABAD: With Rs9.6 billion extra cost due to shortage of Liquefied Natural Gas (LNG) in July, the National Electric Power Regulatory Authority (Nepra) on Wednesday finalised about Rs1.38 per unit increase in electricity rates for ex-Wapda distribution companies (Discos) for a month under the fuel cost adjustment (FCA).

At a public hearing presided over by Nepra chairman Tauseef H. Farooqui, the authority did not agree to a Rs28bn (Rs1.47 per unit) worth of additional FCA for electricity consumed in July owing to deviation from economic order of dispatch and some other factors.

It, however, allowed about Rs9.6bn impact of lower than required availability of regasified liquefied natural gas (RLNG), saying fuel supply constraints were beyond the control of power system operator. As such, it worked out an additional FCA of Rs1.38 to be charged to consumers in next billing month with a positive revenue stream of Rs21bn.

Nepra says LNG supply constraints are beyond the control of system operator

Interestingly, a couple of days ago a team of the Petroleum Division and its sub-ordinate gas companies led by Secretary Petroleum told a Senate standing committee that LNG shortfall was caused by repeated changes by Power Division companies in the LNG annual delivery plan (ADP). The power companies had changed the ADP eight times during last year, the Senate panel was informed.

However, the representatives of the power companies during the hearing said they did not seek any change in ADP, rather insisted that they had placed firm demand of 1,100 million cubic feet per day (mmcfd) of LNG but supply remained 650-700mmcfd.

The higher fuel cost, on formal notification by the regulator, on Monday would be added to consumer bills in the upcoming billing month of September and yield about Rs21bn additional revenue to Discos. These rates would not be applicable to K-Electric consumers or agricultural and residential consumers of Discos consuming up to 50 units per month.

The Central Power Purchasing Agency (CPPA) had requested the regulator to allow about Rs1.47 per unit additional charges to consumers for electricity consumption in July 2021 under the FCA mechanism because of adverse fuel price variations when compared with pre-determined reference costs.

The CPPA said the Discos had charged consumers a reference fuel tariff of Rs5.28 per unit in July while the actual fuel cost turned out to be Rs6.75 per unit and hence Rs1.47 per unit should be allowed to be recovered from consumers. Nepra, however, cut this by about 6paisa per unit for deviation from economic merit order and disputed interpretation of power purchase agreements of two closed projects — Uch-II and Port Qasim.

The regulator criticised the power companies for not removing technical constraints at feeders and transmission system for years, saying the cost of removing those constraints was much smaller than the costs regulator had been allowing every month to power companies to the disadvantage of consumers.

Published in Dawn, September 2nd, 2021