The Ministry of Water and Power has decided not to notify the ''revised tariff'' of Karachi Electric Supply Corporation (KESC) unless approved by the Prime Minister.
"The increase of 23 paisa per unit, across-the-board, is too much, and the ministry can not notify it without the approval of the Prime Minister," sources close to Minister for Water and Power Liaquat Ali Jatoi told Business Recorder on Wednesday.
They said that the Ministry of Law had vetted the draft of revised tariff notification, and Finance Ministry had verbally favoured the proposed increase, but formal approval of Prime Minister was necessary, as it would put additional burden of 23 paisa per unit on the consumers.
The National Electric Power Regulatory Authority (Nepra) had allowed the utility to raise tariff at the end of February, but the government has not notified it.
The regulator, however, has not raised the tariff for the ''lifeline consumers'' who use up to 50 units per month, as per the policy decision of the government.
The ''revised tariff'' with 23 paisa increase, when notified, would be applicable to domestic, commercial, industrial and agricultural consumers.
The tariff increase was made on account of increase in fuel price and other passthrough items during April-June 2005 under the quarterly fuel adjustment formula. It may be mentioned that the utility has also sought 18 paisa per unit increase in power tariff, in addition to 23 paisa per unit increase yet to be notified, to cover backlog of previous quarter and waiver from maximum limit of 4 percent price cap.
The new management of KESC is of the view that revenue being collected from the existing tariff is insufficient to cover the additional cost of fuel and power purchase mainly due to maximum limit of four percent price cap and tariff adjustment mechanism.
In January, Nepra had allowed 6.5 percent raise in KESC tariff which the new management believes was not sufficient to make the organisation profitable and overcome Transmission and Distribution (T&D) losses, unless the increase in variable cost is passed on to the consumers in toto.
"The corporation should be allowed to recover the costs, prudently incurred, for meeting the needs of its consumers, consistent with the standards and guidelines contained in section 17 of the tariff, standards and procedure rules," the KESC petition said.
KESC has worked out total revenue loss of Rs 1.843 billion during one year (Rs 1.471 billion in first nine months and expected loss of Rs 372 million during January-March).
As per the quarterly tariff adjustment structure, fuel price applicable to the past quarter shall be on actual basis whereas the latest fuel price shall be applicable to the next three quarters.
But, KESC, in its petition, had pointed out that furnace oil prices varied (increase /decrease) as the same was linked with international prices whereas the gas prices once increased have no possibility of reduction in future.
In the last two quarters (July-December), KESC asked the regulator that price of gas increase from January 1 be considered for the next quarter in quarterly tariff adjustment but the plea was not accepted.
Since gas prices have been increased from Rs 208.91 to Rs 240.91 per MMBTU from January, KESC was expecting to lose revenue of Rs 400 million in the first quarter due to non-reflection of new gas price.
KESC shortfall was being met by the GoP prior to its privatisation. Now the investor is required to provide funds for operational shortfall as the government extends only subsidy to the extent of the difference between determined and notified tariff.
In the petition, it was argued that there should be a realistic tariff formula to put the utility onto a more viable footing, enabling it to finance the capital expenditure required for availability and reliability of power supply, reducing energy losses, improving customer services and running it efficiently.
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