ISLAMABAD: Consu­mers will pay Rs4.92 per unit extra next month for electricity consumed in February, after the power regulator approved the hike as additional fuel cost adjustment (FCA).

The National Electric Power Regulatory Autho­rity (Nepra) notified the increase on Monday. It will impact consumers of all ex-Wapda distribution companies (Discos), generating a net financial impact of about Rs45bn.

The net tariff increase because of the FCA impact would be about Rs7.51 per unit owing to its partial spillover to the upcoming quarterly tariff adjustment (QTA), as explained by the regulator during a public hearing on March 28.

The adjustment will be applicable to “all the consumer categories except Electric Vehicle Charging Stations (EVCS) and lifeline consumers”, said the Nepra’s notification.

Earlier, the Central Power Purchasing Agency (CPPA), on behalf of Discos, had sought an additional FCA of Rs4.99 per unit for the electricity consumed in February.

It claimed that the reference fuel cost for January was set at Rs4.43 per unit, but the actual fuel cost more than doubled to Rs9.42 per unit.

The additional FCA is about 113pc higher than the pre-fixed fuel cost of Rs4.43 per unit already charged to consumers in February.

After minor deductions, the regulator worked out the total per unit fuel cost at Rs9.35 and allowed Rs4.92 per unit additional FCA — 7 paise per unit lower than the Discos’ demand.

Poor fuel price calculations

It also calls into question the capabilities of the power sector bureaucracy to forecast fuel costs even for six to seven months.

The additional FCAs have remained over 80pc higher in recent months than pre-determined fuel costs notified at the start of the fiscal year.

This increase in FCA is on top of about 26pc inc­rease in annual base tariff and another 16pc hike under quarterly tariff adj­u­stment already in place.

As a result, consumers would continue to pay excessive bills despite lower consumption. This was despite the fact that more than 77pc share of electricity came from local resources.

The higher FCA for Feb 2024 was mainly because of the adverse fuel mix than estimated and higher domestic coal and gas prices, although imported fuel prices, including furnace oil and LNG, were lower in February, and the exchange rate remained stable.

The actual supply from cheaper hydropower and domestic coal was about 2pc and 5pc lower than reference estimates, respectively, while imported coal’s share was also about 6pc lower.

On the other hand, the share of RLNG-based supply went beyond 20pc of the national grid, although it was estimated to be zero.

The nuclear supply to the grid was also lower than the reference estimate.

‘Concerns’ at low demand

Besides, the regulator expressed serious concerns over the constantly declining electricity demand.

Till February 2024, the overall demand had reduced by around 12pc compared to reference projections.

“This decrease in sales would consequently result in higher quarterly adjustments, leading to further increase in tariff”, the regulator noted and directed the CPPA and Ministry of Energy to analyse the impact of ending commercial-based load-shedding and submit a proposal to improve the demand.

It was also highlighted that currently, capacity charges constitute over 60pc of the tariff, much higher than international standards.

The regulator also asked the CPPA and the government “to evaluate the possibilities of reducing capacity charges while remaining within the legal framework”.

The Nepra also expressed displeasure that supply from wind-based power plants was being curtailed, leading to the functioning of power plants running on expensive imported fuel.

It was also observed that the Guddu Thermal Power Station was being operated on a 45pc plant factor on open cycle instead of combined cycle.

Had this plant been running on combined cycle, it would have reduced the cost of generation since it was a more efficient process.

The power regulator also noted the National Transmission and Despatch Company’s version that the constraint in the North-South corridor was due to national generation coming at the low of 7,000 to 8,000 MW, even though the system had a 27,000MW evacuation capacity.

Ironically, $655 million were spent on developing the corridor’s extension which would not be required beyond 2030 due to new hydel power plants coming in the northern region.

Published in Dawn, April 9th, 2024

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