Fuel charge adjustment: Nepra set to pass financial burden of Rs31bn to consumers

ISLAMABAD: National Electric Power Regulatory Authority (Nepra) is all set to pass on the financial burden of Rs31 billion to consumers of distribution companies (Discos) under fuel charge adjustment (FCA) mechanism added to the generation cost due to short supply of RLNG, higher consumption of furnace oil, HSD and forced outages and technical issues. These figures were shared at a public hearing held in Nepra on Thursday on a tariff adjustment request of Central Power Purchasing Agency Guaranteed (CPPA-G) under FCA mechanism.

CPPA-G has sought an adjustment of Rs 2.07 per unit in the monthly FCA of August 2021 due to variation in prices of different fuels and previous adjustments. However, Nepra will approve an increase between Rs 1.95 per unit to Rs 2.06 per unit.

Nepra Chairman Tauseef H Farooqi presided over the hearing whereas Vice-Chairman Rafique Ahmad Shaikh, Member Balochistan Rehmatullah Baloch and Member KP Engineer Maqsood Anwar Khan were also present.

Nepra’s tariff team noted that reference generation was 14,052 GWh at an estimated cost of Rs 64.935 billion but actual generation was 16,078 GWh, in August 2021 cost of which was Rs 103.097 billion, which implies cost increased by Rs38 billion.

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The head of Nepra’s Monitoring & Enforcement Wing (M&E) Khawar, stated that out of the total 16,087 GWh energy generated in August 2021, 1,627 GWh (10.23 per cent) was generated from RFO/ HSD fuel cost as compared to the reference value of 547GWh (3.89 per cent).

He maintained that the cost of both fuels, i.e., furnace oil and HSD has been calculated at Rs 30.136 billion. The Authority was informed that 19 GWh electricity was generated from HSD in August against zero reference generation at a cost of Rs 449 million whereas 1,646 GWh was generated from RFO against reference generation of 547 GWh costing Rs 29.687 billion.

According to him, the total financial impact of deviation from Economic Merit Order (EMO) has been calculated at Rs 1.946 billion in August 2021, of which Rs524 million was on account of RLNG shortage. He said, as per data submitted by NPCC, the average RLNG allocated to the power sector was 691 MMCFD against a demand of 1000 MMCFD. The financial impact of system constraints has been estimated at Rs 1.3 billion in August as cost incurred due to underutilization of efficient plants/ operation of expensive plants to avoid overloading of Muzaffargarh, New Multan, Sarfraz Nagar, Gatti, LSKP grids.

The financial impact due to underutilisation of efficient power plants has been calculated at Rs122.63 million.

However, representative of National Power Control Centre (NPCC), Nasir, noted that Petroleum Division supplied only 671 MMFCD in August against demand of 1000 MMCFD.

During the hearing, tension was witnessed between Vice Chairman Nepra Rafique Ahmad Shaikh and CFO CPPA-G on some points. However, Chairman Nepra intervened and diverted their attention towards other matters.

Nepra’s technical wing, also calculated financial impact of Rs 358.91 million on account of part load Balloki and Haveli Bahadar Shah. CFO, CPPA-G argued that the invoices have been prepared and submitted as per power purchase agreements and tariff approved by Nepra.

It was also revealed that three power plants i.e., China Hub shut down due to lightning, Guddu 1200 MW and one unit of Balloki were on forced outages due to which 1600 GWh energy was out of the system.

To a question of Chairman Nepra, CFO CPPA-G Rehan Akhtar assured the Authority that Liquidated Damages (LDs) will be claimed against forced outages from plants in accordance with the agreements.

Chairman Nepra directed both the NPCC and CPPA-G to hold meetings with Nepra’s team next week to resolve differences on different issues and finalise joint mechanisms to avoid arguments during the hearings.

According to Nepra team, actual FCA in August was Rs 6.7988/kWh against reference FCA of Rs 4.7334/kWh, showing an increase of Rs 2.0654 per unit. However, M&E Wing recommended a deduction of Rs 1.423 billion on account of EMO deviation, financial impact of which is Paisa 9.12 per unit. Likewise, Technical Wing has recommended an adjustment of Rs 358.91 million (Paisa 2.30 per unit) as PPA factors adjustment.

Nepra team has estimated proposed fuel price variation of Rs1.9512 per unit for August.

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Winding the hearing, Chairman Nepra announced that price variation would be between the ranges of Rs 1.9512 per unit to Rs 2.0654 per unit as final impact will be determined after verification of more data.

In another hearing on over-billing on account of enhanced tariff in July and August 2021, most of the Discos and KE admitted to over-billing ranging from 34 days to 37 days and one consumer of Mepco complained of 57 days billing.

Chairman and Members of Nepra directed all the Discos and KE to compensate those consumers who were over-billed during Eid, Ashura holidays and Covid restrictions.

CFO, KE, Aamir Ghaziani proposed that there should be a mechanism for operational requirements.

Chief Executive Officers of Iesco, Dr. Amjad, CEO Lesco, Ch Ameen, CEO Gepco, CEO, Sepco and CEO Pesco proposed that Power Information Technology Company (PITC) should devise a mechanism to accommodate those consumers who are affected due to different cycles of meter reading and different batches.

CEO PITC, Imtiaz maintained that the company has already submitted its preliminary report to the Power Division along with reasons of over-billing.

It was also proposed that the billing cycles should be segregated in three months each to give credit to affected consumers.

Nepra Authority stated that it would not allow Discos and KE to treat consumers unfairly. However, there was a consensus that Nepra should devise a mechanism to refund the over-billed units while keeping in view Discos’ constraints. Nepra also asked the Discos to fire those officials who were involved in over-billing.

Copyright Business Recorder, 2021