Discos seek another tariff raise

The power distribution companies (Discos) are to seek raise in tariff as they believe that the 10 percent increase is not enough to meet the financial shortfall, well-placed sources in the Ministry of Water and Power told Business Recorder.
On February 24, the federal government allowed Discos to raise power tariff by 10 percent against the demand of 33 per cent increase. This was applicable for all except the lifeline consumers, the sources said. They said adding that the companies accepted the notified tariff but decided to file review petitions to seek additional raise.
The sources said that the prices of furnace oil and gas have increased by 90 percent and 54 per cent respectively since 2003. There have been substantial increase in electricity demand particularly by the middle income consumers due to liberal bank loans and rural electrification but they are paying much more as compared to the cost of service being provided to them.
Another official revealed that Discos review petitions have already been received by the regulator, but it was not confirmed by Nepra when contacted. Nepra had worked out Discos tariff on the basis of O&M costs (indigenous and foreign) and return on equity.
The sources said that Wapda is still facing Rs 40 billion cash shortfall but was unable to make payment to the Independent Power Producers (IPPs) from whom it purchases power. The Nepra determined the tariff in the light of the World Bank's proposed differential tariff formula.
However, the government would extend subsidy of Rs 21-22 billion irrespective of the fact whether the consumers reside in the jurisdiction of financially weak Disco like Hyderabad Electric Supply Company (Hesco) or financially healthy Islamabad Electric Supply Company (Iesco).
"Nepra determined differential tariff for all the Discos but the government approved Rs 22 billion subsidy to keep it similar for consumers," the sources maintained. The sources said that the Ministry of Water and Power had provided the notifications of new tariff to the World Bank but did not give any detail about the reaction of the bank.
The Ministry of Water and Power was of the view that if the tariff had not increased, the Wapda deficit would have been 80 billion or more and deficit of KESC over Rs 17 billion. Despite the tariff increase, the government will still have to provide subsidy of Rs 54.5 billion to Wapda consumers and about Rs 14.15 billion to KESC consumers.