OUR current power-sector billing system disproportionately affects all those who are engaged in self-generation and rely on the grid only as a standby, particularly in captive power scenarios. Against this backdrop, the new fixed charge system introduced in the latest tariff rebasing has revealed rather significant flaws that need an urgent rectification. Specifically, the system currently allows industries with self-generation capabilities to maintain their sanctioned load on the grid at an unr- easonably low cost, creating a substantial burden on other consumers and the overall grid infrastructure.

Consider a scenario where consumers with, say, 288kW sanctioned load, who have been generating electricity through captive means, keep the grid on standby. However, due to the fact that their maximum demand indicator (MDI) has not increased in the preceding 60 months, they are required to pay only Rs3,383 to maintain the grid connection. As such, this nominal fee does not reflect the true cost of maintaining the grid, including transmission infrastructure, staffing, as well as the return on investment (ROI) required to support this standby capacity.

In essence, which private industry or trader, in any business would provide services, such as storage, warehousing, loading, unloading, delivery and credit on goods purchased by a customer, without receiving payment, allowing the customer to use them at their own dis- cretion? In the case of self-generation, all these services are still being provided by the grid and other customers, while the person who placed the order is essentially buying from another seller.

Beyond any doubt, the impact of this is far-reaching. If we calculate the potential capacity charge impact for a consumer who keeps the grid on standby while primarily relying on cheaper self-generated electricity, the numbers are staggering; 288kW sanctioned load x Rs18.39 (determined capacity charge) x 24 hours x 30 days = Rs3,813,350.

Unsurprisingly, this amount is effectively a hidden subsidy paid by other consumers who must absorb the cost of keeping the grid operational and ready to supply power on demand, even though self-generating consumers are contributing only a fraction of what they should be paying.

Unfortunately, it has become rather difficult to comprehend why the billing system would allow such an arrangement, where industries with self-generation capabilities are permitted to offload the financial burden onto the grid and other consumers.

Undoubtedly, this practice distorts the market, encourages inefficiency, and unfairly penalises consumers who do not have the means to self-generate electricity.

Nonetheless, the solution lies in the efforts to re-evaluate the charges applied to industries that keep the grid on standby while generating their own power. Moving on, the capacity should be priced appropriately to reflect the true cost of maintaining the grid and ensuring its availability. This is not merely a question of fairness; it is essential for the financial sustainability and operational efficiency of the power sector.

Finally, the National Electric Power Regulatory Authority (Nepra) should reconsider the current fixed charge system as well as implement a more equitable approach that ensures all consumers, particularly those engaging in captive power generation, contribute their fair share towards the regular maintenance of the national grid infrastructure.

Rehan Jawed
Chairman, Ogra and Nepra Committee, Korangi Association of Trade and Industry Karachi

Published in Dawn, August 26th, 2024