• Seek Rs1.83 per unit increase in Oct bills under fuel cost adjustment; lifeline, protected domestic consumers will be exempted
• Rise sought even though 74pc of power generation in Aug attributed to cheaper fuels

ISLAMABAD: Despite the nearly 26pc increase in annual base tariff already in place, and about 18pc quarterly adjustments in the approval process, there appears to be no end to rising electricity costs as ex-Wapda Distribution Companies (Discos) have sought another Rs1.83 per unit in fuel cost adjustment (FCA) to squeeze Rs30bn more from consumers next month.

This is despite the fact that almost three-fourths (over 74pc) of power generation comes from local cheaper fuels like hydro, coal, gas, nuclear, wind, solar and bagasse.

Through their commercial agent — the Central Power Purc­h­a­sing Agency (CPPA) — Discos have filed a joint petition with the National Electric Power Regula­t­ory Authority (Nepra) for an additional fuel cost adjustment (FCA) of Rs1.83 per unit in the billing month of October for electricity consumed in August. The Nepra has accepted the petition and has called public hearings on Septe­mber 27 to see if the proposed increase in tariff is justified in line with the FCA mechanisms and economic merit order.

The increase in FCA is despite the fact that the base average tariff has gone up by about Rs7.5 per unit with effect from July 1. Another Rs5.40 per unit quarterly tariff adjustment (QTA) worth Rs146bn is just waiting in the wings, as the regulator has already completed the public hearing process and may stagger its recovery over six months at a rate of Rs3.55 per unit, instead of Rs5.40 per unit in three months.

Power generation in August

The additional cost is also despite the fact that the country’s hydropower plants made the healthiest contribution of almost 38pc to the overall national power grid in August, against 37pc in July and 26.96pc in June. Hydropower has no fuel cost.

The LNG-based power generation at 17.17pc stood second in August, down from 19.67pc in July and 18.55pc in June. The third largest share of 12.79pc in August came from nuclear power plants, down from 14.2pc in July and 13.54pc in June this year.

This was followed by local coal-based generation, which stood at 10.3pc, and that of imported coal at 4.51pc.

This is the first time that Nepra has started separately reporting the local and imported coal-based power generation which shows a massive difference. In July this year, the cumulative (local and imported) coal-based generation stood at 14.69pc, compared to 17.75pc share in June.

Power supply from domestic gas maintained its downward journey and contributed just 7.60pc to the national grid in August against 7.61pc in July, 8.54pc in June, 10.35pc in May and 12pc in April.

The fuel cost of furnace oil-based power generation increased further to Rs33.32 per unit in August when compared to Rs28.7 per unit in July against Rs26.1 per unit in June and Rs23.24 per unit in May.

The LNG-based power generation cost in August was slightly reduced to Rs23.7 per unit from Rs24.43 in July and Rs24.07 in June. Furnace oil-based generation in August also increased to 4pc of the total power generation when compared to 2pc in July but was still lower than its 5.4pc share in June.

The cost of power generation from domestic gas slightly dropped in August to Rs13.22 per unit from Rs13.7pc unit in July but was higher than Rs11.74 per unit in June.

The local and imported coal-based power generation costs showed a wide difference. The local coal-based generation amounted to just Rs7 per unit compared to Rs20 per unit on imported coal. The combined coal-based fuel cost in July had stood at Rs11.54 per unit and Rs14.05 per unit in June.

Three renewable energy sources — wind, bagasse and solar — together contributed about 5.8pc share to the national grid in August, up from 4.5pc in July and 5.6pc share in June. Wind and solar have no fuel cost, while that of bagasse-based generation cost remained unchanged at about Rs6 per unit.

Reference fuel cost

The CPPA claimed on behalf of Discos that the consumers were charged a reference fuel cost of Rs6.65 per unit in August, but the actual cost turned out to be Rs8.47 per unit, hence an additional charge of Rs1.83 per unit should be allowed.

After approval by Nepra, the increase in FCAs would be adjusted in consumers’ bills in the upcoming billing month of October.

The FCA is reviewed every month as per the tariff regime applicable across the country and is usually applicable to the consumers’ bills for one month only. The higher FCA, on approval, would be applicable to all consumer categories except lifeline power consumers and protected domestic users consuming up to 300 units, and agricultural consumers and electric vehicle charging stations (EVCS).

The adjustment on account of monthly FCA is also applicable to domestic consumers having Time of Use (ToU) meters irrespective of their consumption level.

Under the tariff mechanism, changes in fuel cost are passed on to consumers only on a monthly basis through an automatic mechanism, while quarterly tariff adjustments on account of variation in the power purchase price, capacity charges, variable operation and maintenance costs, use of system charges and including the impact of transmission and distribution losses are built in the base tariff by the federal government.

Published in Dawn, September 20th, 2023

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