ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) on Monday allowed Rs12.68 per unit increase in power rates for K-Electric under quarterly tariff adjustment (QTA) for the period — April to June FY2021-22, with a net additional revenue of about Rs56bn to the Karachi-based private utility.
The decision is unlikely to affect consumers in Karachi because of uniform tariff policy of the government under which same power rates are applied across the country for consumers of all distribution companies, including KE. The federal government is, however, expected to take the additional financial hit through differential tariff subsidies paid out of the budget to maintain uniform rates for all distribution companies.
This was reinforced by the regulator in a rather non-committal hit in a statement. “As per practice, the government maintains a uniform tariff across the country and generally the differential is adjusted through subsidy,” it said.
The KE had originally demanded QTA of Rs14.85 per unit for the fourth quarter (April to June) FY 2021-22 but later revised it down to Rs14.533/kWh. After a brief public hearing on August 31 and exchange of data, the regulator allowed an increase in QTA of Rs12.68 per unit. The permission for lower QTA was granted mainly because of about Rs19bn worth of write off amounts on account of unrecoverable bills which the regulator said required further examination and reconciliation of data.
The regulator said the preliminary analysis of the provided consumer-wise details of write-offs and the response submitted by the KE’s auditors required further deliberations. Therefore, the amount of write-offs of Rs14.5 billion claimed by KE, including amount already built in the tariff, had not been included in QTA workings. Likewise, the Rs4.04bn amount already built in the tariff had also been deducted. The regulator “will decide the matter accordingly”, it said.
Under the KE’s tariff mechanism, the impact of change in fuel component of power purchase price of national grid and KE’s own generation fuel cost component due to variation in fuel prices, generation mix and volume is passed on to the consumers directly in their monthly bills in the form of fuel charges adjustment.
However, the impact of monthly variations in K-Electric own generation’s fuel cost component as well power purchase price to the extent of targeted transmission and distribution losses, not taken into account in the monthly FCAs, is adjusted on a quarterly basis. In addition, the monthly variations in the variable operation and maintenance and fixed costs of the PPP are adjusted on a quarterly basis.
The impact of these variations is worked out by the regulator based on targeted units to be sold in the next quarter and to be adjusted in the KE’s schedule of tariff. The actual payments on account of Workers Welfare Fund, Workers Participatory Provident Fund etc to the IPPs are done on a yearly basis upon production of verifiable documentary evidence. These quarterly tariff adjustments notified by the regulator on account of PPP, capacity charges, variable operation and maintenance costs, use of system charges and impact of transmission and distribution losses are built in the base tariff by the federal government.
Published in Dawn, October 25th, 2022