Base power tariff: Nepra all set to approve increase of up to Rs7.50 per unit

ISLAMABAD: The National Electric Power Regulatory Authority (NEPRA) is all set to accord final approval for massive raise in electricity base rates up to Rs 7.50 per unit (27 percent) for those already under financial stress domestic consumers for FY 2023-24, to be effective from July 1, 2023.

Tariffs of industry, commercial sector, agriculture tube-wells, AJK, public lighting, and other categories of consumers will also have to face the brunt of Rs7.50 per unit.

The average sale rate would reach Rs28.36 per unit from Rs22.59 per unit, posting an increase of Rs5.76 per unit, of which variable charges are Rs 27.65 per unit - from Rs21.90 per unit with an increase of Rs Rs5.75 per unit and fixed charges of Rs0.01 per unit - to Rs0.70 per unit from Rs0.69 per unit. The government intends to earn Rs477 billion though this rebasing.

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The increase in the base rate of electricity is also part of the pact signed between the Government of Pakistan and the International Monetary Fund (IMF), which says that the government has to notify Nepra’s determinations without any delay or amendment.

The Regulator is scheduled to hold a public hearing on Monday (tomorrow), just as an eye wash, on the Motion of Leave of Federal Government submitted by the Power Division for adjustment in tariffs of Discos and K-Electric, already approved by the Federal Cabinet through circulation. The rate of one unit of electricity for those consumers who will use over 300 units per month will touch Rs 55.52 per unit after the inclusion of FCAs, taxes, and surcharges, whereas for some categories, it will be over Rs 60 per unit.

On July 14, 2023, the Nepra approved an average rebasing in tariff of Rs 4.96 per unit across the board, but the government, after intensive consultation, decided to pass more financial impact of the proposed increase to unprotected domestic consumers and other categories through cross-subsidization to the protected category of domestic consumers and adjustment of Rs 148 billion subsidy.

According to the Federal Government’s Motion, the tariff of the protected category of domestic consumers will not be changed, which means Rs 3.95 per unit for up to 50 units per month, Rs 7.74 per unit for 51-100 and 001-100 units and Rs 10.06 per unit for 101-200 units.

However, the base tariff of those unprotected domestic consumers who use 001-100 units will increase by Rs 3 per unit to Rs 16.48 per unit from Rs 13.48 per unit (22 percent increase), Rs 4 per unit on 101-200 units (from 18.95 to Rs 22.95 per unit, 21 percent increase). The base tariff of consumers using 201-300 units monthly will increase by Rs 5 per unit to Rs 27.14 per unit from Rs 22.14 per unit (23 percent increase). Domestic consumers who use 301-400 unit will face the brunt of Rs 6.50 per unit as tariff base tariff will increase to Rs 32.03 per unit from Rs 25.53 per unit which is 25 percent higher than existing tariff.

The base tariff of consumers who consume 401-500 units per month will be raised by Rs 7.50 per unit (27 percent) to Rs 35.24 per unit from Rs 27.74 per unit. Base tariff of consumers who use 501-600 units per month will reach Rs 36.66 per unit from Rs 29.16 per unit with an increase of 7.50 per unit (26 percent increase). Tariff of 610-700 units per month will touch Rs 37.80 per unit from Rs 30.30 per unit with Rs increase of 7.50 per unit (25 percent increase). Those consumers who use over 700 units monthly will pay Rs 42.72 per unit as compared to Rs 35.22 units with increase of Rs 7.50 per unit (21 percent).

For residential consumers of Time of Use (ToU) for three phase, off peak Rs 35.57 per unit and peak Rs 41.89 per unit. Commercial ToU tariff for three phase, off peak Rs 35.38 per unit and peak Rs 41.35 per unit. Industrial B3, off peak Rs 32.03 per unit, peak Rs 37.83 per unit and industrial B4, off peak Rs 31.93 per unit and peak Rs 37.83 per unit.

Analysts argued that this is a big blow to electricity-heavy industries like steel, if not passed on. It could also affect margins of some cement players who are reliant on grid. Roughly this could mean over Rs 50/bag impact if cement is produced using grid. However, company wise impact would depend upon the power mix.

According to the Nepra, the federal government has requested to issue the uniform Schedule of Tariff (SoT) of the Discos by incorporating targeted subsidy and inter-Discos tariff rationalization pursuant to guideline for the category of each of Nepra determined notified tariff (inclusive of subsidy/ tariff rationalization surcharge/inter-Disco tariff rationalization). Once considered and approved, it will lead to determination of “uniform final tariff” in terms of Section 31(7) of the Act, for notification by the federal government from July 1, 2023 to the extent of modification and supersession of existing determined notified rates.

The government has also requested to modify uniform variable charges for K-Electric in order to maintain uniform tariff across the country, so as to recover the revenue requirements of the KE determined by the Authority (inclusive of quarterly adjustments for quarter ending June 2022 vide decision of October 24, 2022) keeping in view the proposed targeted subsidy and cross subsidy.

Copyright Business Recorder, 2023