ISLAMABAD: The government has sought the National Electric Power Regulatory Authority’s (Nepra) approval for an additional fuel cost adjustment (FCA) of Rs3.5 per unit to extract over Rs29 billion from consumers for electricity they consumed in April.

Surprisingly, this demand comes despite the fact that 75 per cent of the overall power supply during the month was generated from cheaper local fuels.

The Central Power Purchasing Agency (CPPA) — a subsidiary of the Power Division — has filed a formal petition before the regulator for an increase of Rs3.4883 per kWh over the reference tariff of Rs5.492 per unit already charged to consumers in April.

The proposed additional FCA is almost 64pc higher than the pre-fixed fuel cost of Rs5.49 per unit, which calls into question the power sector bureaucracy’s capabilities to forecast fuel costs even for 6-7 months.

In recent months, the additional FCAs have ranged between 50 and 115pc higher than the pre-determined fuel costs notified at the start of the current fiscal year.

This increase in FCA is on top of about a 26pc rise in the annual base tariff and another 10pc hike under the quarterly tariff adjustment currently in place and being charged to consumers at Rs2.75 per unit. As a result, consumers continue to pay excessive bills as consumption increases with rising temperatures. This was des­pite more than 75pc of electricity coming from local resources. Nepra has accepted the request for a public hearing on May 30.

The higher proposed FCA is apparently due to the lower availa­bility of hydropower, hig­her domestic coal and gas prices, and greater utilisation of LNG prices.

In a petition, the CPPA acting as commercial agent of the Discos demanded an additional FCA of Rs3.488 per unit in the billing month of June for electricity consumed in April. It claimed that the reference fuel cost for March was Rs5.49 per unit, but the actual fuel cost turned out to be Rs8.98 per unit. It said about 8,639-gigawatt hours (GWh) of electricity was generated at an estimated fuel expenditure of Rs79.56bn (Rs9.21 per unit) in April, of which 8,375 GWh energy was delivered to Discos at Rs75.2bn (at Rs8.98 per unit) — lower than generation cost apparently because of some previous adjustments.

The data showed consumption in April was almost 14pc lower than the same month (9,734Gwh) last year, mainly because of lower temperatures and changed consumption patterns due to economic slowdown and consumers shifting to alternatives.

The Rs3.5 FCA for April is also 75pc higher than Rs2 per unit in the same month last year.

Thus, LNG-based power generation provided the biggest share of about 25pc to the natio­nal grid in April, replacing the usual hydropower supply. The hydropower supply came in at second with 24pc share in April when compared to 28pc in March. Hydropower has no fuel cost.

The third-biggest share in the national grid came from nuclear power, at about 24pc in April, down from 26pc in March. This was followed by an 11.2pc contribution from local gas, against 10pc in March. Then came local coal-based power, which contributed 10pc to the grid in April against its 11pc share in March.

The cost of LNG-based power generation in April increased to Rs22.8 per unit, up from Rs22.2 per unit in March. The fuel cost of domestic gas-based generation slightly dropped to Rs13.25 per unit, down from Rs13.7 per unit in March.

On the other hand, the cost of local coal-based generation dropped to Rs15.8 per unit in April, down from Rs16.8 per unit in March. The imported coal-based generation stood at Rs22.85 per unit, but its contribution was less than 0.3pc.

Three renewable energy sources — wind, bagasse and solar — contributed 5.3pc share to the grid in April compared to 4.9pc in March. Wind and solar have no fuel cost, while the price of bagasse-based generation remained unchanged at about Rs6 per unit.

After approval by Nepra, the increase in FCAs will be reflected in consumers’ bills in June.

Published in Dawn, May 21st, 2024

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