Power generation: Increase in costs leaves consumers high and dry

ISLAMABAD: The country's electricity generation cost has become costlier by over 50 per cent - Rs 6.4653 per unit in August 2021 as compared to Rs 4.2928 per unit during August 2020, which is passed on to the consumers under the garb of monthly Fuel Price Adjustment (FCA) mechanism.

The electricity is delivered to the consumers after addition of billions of rupees in the name of supplemental charges/ previous adjustments. Sometimes, Nepra, the regulator, allows requested adjustment but occasionally disallows some costs, especially those which are included by violating Economic Merit Order (EMO).

This essential increase is in addition to rise of Rs1.95 per unit and Paisa 22 per unit and quarterly adjustments. The incumbent government has increased electricity tariff by over 30 per cent in its three-year tenure.

In 2018, national average tariff was Rs 13.92 per unit sans heavy taxes and surcharges which has now reached Rs 15.54 per unit. Power sector's inefficiencies and losses are also being passed on to the consumers.

All-time high power generation

A comparison of fuel cost of August 2021 with the corresponding month of 2020, indicates an increase of 50.6 per cent in FCA.

The official figures show that price of electricity generated on coal has increased by 33.4 per cent to Rs 8.4101 per unit in August 2021 as compared to Rs 6.3039 per unit in August 2020. The generation cost of High Speed Diesel (HSD) has increased by 4.6 per cent to Rs 19.3422 per unit from Rs 18.4835 per unit.

Electricity generation (cost) rises

The data prepared by Central Power Purchasing Agency Guaranteed (CPPA-G), generation cost of Residual Fuel Oil (RFO) i.e., furnace oil has been raised by 23 per cent to Rs17.0783 per unit in August 2021 as compared Rs13.9013 per unit in August 2020. The most exorbitant increase has been witnessed in generation cost of electricity produced from RLNG - a rise of 76 per cent - to Rs12.0604 per unit as compared to Rs6.8534 per unit during August 2020. The main reason for inflated cost is expensive spot buying of LNG.

According to the data, generation cost of electricity produced on natural gas has posted a growth of 16.4 per cent to Rs8.1720 per unit as compared to Rs7.0172 per unit. The generation cost of electricity produced from nuclear power plants constituted a growth of 4 per cent, electricity imported from Iran, Rs 0.82 per cent. However, no change has been reported in the electricity generated from bagasse.

Nepra releases two power tariff determinations

An analysis of data of August 2018 with August 2021, indicates an average increase of 16.5 per cent in generation cost, of which coal was 31 per cent, HSD, 10.6 per cent, RFO 18 per cent, natural gas 64 per cent, RLNG 16 per cent, nuclear 4.6 per cent, import from Iran Rs 0.80 per cent. The cost of mixed energy, being purchased from smaller projects, and bagasse has reduced in three years.

Electricity prices were reduced in some months on the basis of generation cost during the last three years and refund was given to domestic consumers, who used over 300 units. Lifeline consumers, who use up to 300 units in a month, did not qualify for refunds.

Now the government has already approved a subsidy rationalisation plan, which can also be ratified by Nepra, very soon, which is meant to alter the definition of lifeline consumers. The government wants to shrink the number of lifeline consumers by amending the definition that if a consumer uses even one more unit more than 200 units in any month in a year, he/she will be deprived of this facility for at least six months.

Copyright Business Recorder, 2021