ISLAMABAD: The Federal Government is reportedly unhappy with the power sector regulator for giving “unfair” determination on wheeling charges, and is considering issuing guidelines to Nepra for reconsideration of the decision, well informed sources told Business Recorder.
National Electric Power Regulatory Authority (Nepra), sources said, has acknowledged in its determination that ‘cross subsidy’ and ‘standard costs’ are real issues and if not paid by consumers will result “in either increase in tariff for the remaining consumers or additional support by the Federal Government through subsidy.”
Nepra decision for not allowing the standard cost and cross subsidy is based on following arguments: (i) Nepra wishes to encourage wheeling; and (ii) Nepra wishes to incentivize Discos to improve their performance in terms of reducing T&D losses, minimize pendency of new connections and improve recoveries, etc.
According to sources, Nepra does not allow recovery of any ‘inefficiency’ in the consumer tariff, and the rate allows recovery of prudently incurred cost only, adding that the regulator’s argument is incorrect and exhibits that the consumer end tariff is not comprehensively understood.
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However, National Electricity Policy (NEP) 2021 clauses 5.5.2 states that “the approved wholesale market design, its implementation and subsequent development takes into account the following: (i) providing a level playing field to oil market participants through uniform application of cross-subsidization and other grid charges to consumers of all suppliers; and (ii) the Government shall take a decision on the recovery of costs that arise due to advent of the open access and market liberalization.”
Total cost of power system is Rs 2.804 trillion of 113 billion units per annum @ average rate of Rs 24.82 per unit. Of these variable charges are Rs 1.152 trillion, fixed charges- power plants, Rs 1.251 trillion, NTDC/UoSC & MoFRs 115 billion and Discos’ fixed cost Rs 287 billion.
According to the government, total commercial, bulk and industrial consumers are 3.85 million whereas estimated sale to them is 38.75 billion units.
The total financial impact of these three categories is Rs 680 billion, of which standard cost is Rs 433 billion whereas cross subsidy is Rs 247 billion. Per unit impact has been calculated at Rs 17.62 per unit.
The financial burden of 20 per cent wheeling will be Rs 136 billion @ 1.29 per unit, 30 per cent wheeling Rs 204 billion@ 2.01 per unit and 50 per cent wheeling Rs 340 billion @ Rs 3.63 per unit.
The government argues that since cross-subsidies are not included in wheeling charges it implies left for subsidy/ circular debt or to be recovered from remaining consumers.
The government maintains standard costs not included in wheeling charges which also indicates that left for subsidy/ circular debt or to be recovered from remaining consumers. NTDC’s Use of System Charges (UoSC) have been allowed to charge, where applicable, recovery not fully covered. Hybrid BPCs have been have been allowed and fixed charges will be determined on case-to-case basis.
Copyright Business Recorder, 2022
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