ISLAMABAD: Karachi Electric (K-Electric) will charge the rate of Rs 12.96 per unit to industrial consumer categories (B1, B2, B3, B4 & B5 ) from July 1, 2021 to October 31, 2023, on off-peak incremental consumption basis over their consumption in corresponding months of period March 2019 to February 2020.
However, new consumers having no reference consumption available in period of March 2019 to February 2020 shall be offered the same package through slab-wise consumption structure. The package will be applicable to all hours of the day, during the period when Time of Use (ToU) tariff for industrial users is discontinued.
This decision was taken by the Economic Coordination Committee (ECC) of the Cabinet in its meeting held on August 16, 2021.
Sharing the details, sources in Power Division said that the ECC on 2 November 2020 approved a support package for industrial electricity consumers at the rate of Rs l2.96/Kwh and approved its application for ToU industrial consumers of Discos from Nov-20 till Oct-23. However, the applicability of the same for industrial consumers of K-Electric (KE) was limited till June 30-2021.
The decision for K-Electric is as follows: "discount of Rs 4.96/kWh from the base rate, will be offered for industrial consumer categories (B1, B2 & B3) from November 1, 2020 to June 30, 2021 for off-peak hours on incremental consumption in corresponding months of the period March 2019 to February 2020. In this case, an estimated subsidy requirement for K-electric shall be approximately Rs 7 billion which shall be provided by the Finance Division from Covid Economic Stimulus Package on actual consumption basis for each month".
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The Federal Cabinet ratified the decision, with inclusion of industrial consumer category B4 and B5 for K-Electric at rate of Rs. I2.96/Kwh with applicability from Nov 2020 to June 2021.
Power Division claimed that incremental consumption package for industrial consumers yielded an average growth of 9.9% in off-peak hours during the period from Nov-20 to Apr-21 against the reference months. K-Electric has witnessed higher incremental sales growth compared to Discos. At the same time, the spurred growth of industrial consumption, on account of the offered incentive scheme, also showed a positive correlation with the economic indicators of the country.
The Power Division further argued that extension of incremental consumption package for industrial consumers of K- Electric requires consideration of technical and commercial dynamics of power system. With planned addition of BQPS III power plant in KE's fleet and additional supply of power from the national grid, KE expects to meet the incremental growth without any load management. However, extreme weather conditions and exceptional growth scenario may result in constrained load shedding for K-Electric consumers.
It further stated that extension of incremental consumption package for industrial consumers (ToU) consumers only of K-Electric at concessionary rate of Rs.12.96/kWh will generate a subsidy requirement of approx. Rs. 32.87 billion from Jul-21 till Oct-23. However, in view of existing merit order for K-Electric, average marginal cost for supplying each incremental unit comes out to be Rs. 14.61/Kwh (at current fuel prices) which may have temporal variations on account of variables such as fuel prices, incremental demand, etc. The respective subsidy requirement for extending the incremental consumption package at the rate of Rs 14.61/kWh will generate a subsidy requirement of Rs 21.66 billion from Jul-21 till Oct-23. Existing tariff for K-Electric is based on price cap mechanism with multi-year horizon and gain/loss on above/below the regulatory benchmarks rests with K-Electric. Further, the regulator has devised the claw back mechanism which results in mutual sharing of annual return on average Regulatory Asset Base.
In addition to Industrial Support Package for incremental consumption, the Cabinet Committee on Energy (CCoE) on April 15, 2021 approved abolishment of Time-of-Use tariff scheme for industrial consumers and extended the existing ToU tariff package from May 1, 2021 to June 2022 with the subsequent evaluation in May 2022 across the country. The approval also reflected that abolishment of ToU tariff scheme for industrial consumers of both K- Electric and Discos will generate a cumulative subsidy requirement of Rs 26 billion from May-2l till Jun-22. Following a CCoE decision, the petition was filed with Nepra by the Power Division and K-Electric. With respect to the recommendations of CCoE, Nepra shared its decision on the proposals regarding the extension of ToU tariff scheme till June 30, 2022, for industrial consumers of Discos and K-Electric.
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Nepra in its decision of June 17, 2021 also extended incremental consumption package to B-1 (non-ToU) industrial consumers of both Discos and KE. Keeping in view the direction in field for conversion of Industrial Non-ToU consumers to ToU metering arrangement, Nepra extended incremental consumption package to B-1(Non-ToU) consumers till Dec-21 with the provision that such conversion shall be completed by Dec-21. For Discos, the incentivized rate for incremental consumption is subsidy neutral however; for K-Electric consumers, implementation of this package for B-1 (Non-ToU) consumers will generate an estimated subsidy requirement of Rs 20 million till Dec-21.
After explaining the case, Power Division submitted the following proposal to the ECC: (i) rate of Rs 12.96/kWh shall be charged to industrial consumer categories (B1, B2, B3, B4 and B5) of K-Electric from July 1, 2021 to October 31, 2023 for off-peak incremental consumption basis over their consumption in the corresponding months of the period March 2019 to February 2020. New consumers having no reference consumption available in period of March 2019 to February 2020 shall be offered the same package through a slab-wise consumption structure. The package will be applicable to all hours of the day, during the period when time of use tariff for industrial users is discontinued; (ii) budget the cumulative subsidy of approx. Rs 32.87 billion as a result of extension of incremental consumption package for industrial consumers K- Electric (July1, 2021 till October 31, 2023); (iii) on incremental consumptions, only positive fuel price adjustments shall be passed to consumers availing the incremental consumption package; (iv) a rate of Rs 12.96/Kwh shall be charged to existing B1 (Non-ToU) industrial consumers of Discos and K-Electric from July 1, 2021 to December 31, 2021 for incremental consumption basis over their consumption in corresponding months of period July 2019 to December 2019. B1 (Non-ToU) consumers having no reference consumption available in period of July 2019 to December 2019 shall be offered the same package through slab-wise consumption structure; (v) existing B1 (Non-ToU) consumers converting to ToU metering arrangement, shall be offered the same package at the concessionary rate of Rs 12.96/kWh for off-peak incremental consumption through slab-wise consumption structure till the applicability of incremental consumption package for Discos and K-Electric respectively; (vi) budget the cumulative subsidy of approx. Rs 20 million as a result of application of incremental consumption package for B1 (Non-ToU) industrial consumers of K-Electric (July 1, 2021 till December 31, 2021); (vii) for Zero Rated Industrial (ZRI) consumer categories, rate of Rs.12.96/kWh or the PKR equivalent of applicable rate, whichever is lesser, shall be charged on incremental consumption till the applicability of incremental consumption package for Discos and K-Electric respectively; (viii) subsidy requirement for extension of industrial packages has been computed using existing applicable tariffs for industrial consumers, and any increase/amend-ments in tariff would lead to change in subsidy requirements. Resulting subsidy amount on account of extension of incremental consumption package and time of use tariff scheme, shall be reconciled every month on actual basis between Power Division and Finance Division, which shall be timely paid by the Finance Division; and (ix) actual subsidy realized for given proposals shall be independent of all other budgeted subsidies for the power sector.
Copyright Business Recorder, 2021
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