ISLAMABAD: The power regulator Nepra has announced a significant fuel cost adjustment (FCA) of Rs4.13 per unit for users of government-owned distribution companies (Discos), marking a substantial financial impact of about Rs35 billion.

This adjustment relates to electricity consumed in November and will be reflected in the January bills of consumers, except those in the lifeline category and K-Electric users.

This development marks the second consecutive month that the National Electric Power Regulatory Authority has approved an FCA for Discos consumers. Previously, in October 2023, it approved an FCA of Rs3.08 per unit, leading to a financial impact of around Rs28.5bn. That amount was recovered in December’s electricity bills.

Amid stagnant salaries, electricity consumers in the country are grappling with frequent hikes in power tariffs. These increases can happen monthly and quarterly.

Nepra notifies fuel cost adjustment for consumers of all distribution companies, except KE

Nepra approves requests from Discos to pass on cost increases to end consumers, often sidelining consumer interests. The escalating energy costs are further compounded by fortnightly fluctuations in petrol prices.

In July 2023, the government increased the base electricity tariff by up to Rs7.50 per unit. A permanent surcharge of Rs3.23 was also imposed to offset the circular debt. The government has also implemented quarterly tariff adjustments (QTAs) and fuel cost adjustments (FCAs).

Despite these measures, the circular debt remains high, hovering around Rs2.6 trillion as of October 2023.

The Discos approach Nepra through a petition to consider raising the base tariff of electricity. The authority considers many factors before suggesting this increase in tariffs to the federal government.

For QTAs, both Discos and the federal government approach Nepra to determine the different costs of power that need to be paid by power consumers.

For FCAs, the Central Power Purchasing Agency (CPPA) asks Nepra on behalf of Discos to determine the cost differential because of the increase in fuel prices to be collected from people every month.

The adjustment for December will be determined on a petition at the end of the current month, which will be notified in the first week of February.The CPPA had demanded Rs4.66 per unit additional FCA for November to raise about Rs35bn.

It claimed that the consumers had been charged at a reference fuel cost of Rs4.78 per unit, but the actual cost turned out to be Rs9.44 per unit. Nepra’s decision, following a hearing on Dec 27, was announced on Thursday.

Despite a significant 76pc of electricity generation from cheaper domestic fuels, power companies are pursuing this additional FCA. This comes on top of a 26pc (Rs7.5) per-unit increase in the annual base tariff and an 18pc (Rs4.13) per-unit hike under the current quarterly tariff adjustment.

Consequently, electricity consumers, anticipating relief due to lower consumption in December, face a considerable FCA charge for the higher usage in November.

Published in Dawn, January 5th, 2024