There is no good news. Electricity bills in August are perhaps breaking records for all kinds of consumers. It was the toughest month because customers paid for their actual consumption and for their arrears in July due to delayed government notification of the tariff increase (issued on 27th July and applicable from 1st July). The depreciating currency will continue to have a direct impact on fuel and electricity prices. And more quarterly adjustments are coming.
The tariff increase across the board (barring protected consumers) is 21-27 percent along with a proportionate increase in taxes. The outgoing government did not increase the tariff in time, which is why the July increase is being imposed in August - making the bills in August higher by 50-60 percent when compared to July. From September, the increase (relative to July) would be 25-30 percent, which will remain till the next tariff increase that is due in July next year.
However, the buck doesn’t stop here. XW DISCOs have already requested Rs146 billion in quarterly adjustments for the Q4FY23 (April 2023 to June 2023), and in the coming months, these would be part of the bill. Further FCA has been applied for July 2023 at a rate of Rs2.07 per unit. Not to mention that the biggest component in the pre-taxed bill is capacity payment, which consumers are paying for plants that were set up in the past - especially, on those where decisions were made under the 2015 power policy. Furthermore, the FY24 tariffs are being set based on a PKR/USD rate of around 280. What will be the PKR/USD rate when FY25 tariffs are being set is anybody’s guess.
The only good news is that the temperature will cool down in the coming months, which would reduce the bills relative to the monthly income as the demand for air-conditioning and fans will fall. However, with the expected rise in gas prices (much needed for efficient use of energy) and expected shortages, the load of geysers may start falling on electricity, which will limit the fall in bills in winter.
The sad story is that the electricity bills will keep on increasing and strain the household budget in this high inflation environment. The power sector will keep on catching up. The new capacities will keep coming and the capacity payment will keep on growing – it used to be Rs200 billion in 2013 versus the current Rs2,000 billion.
The recoveries will fall due to an increase in prices. The circular debt will keep on rising. And the legacy cost will keep haunting. Here ironically, the Discos are numb, and not saying anything but will keep sending soaring bills to the consumers. There is a need to provide clarity on pricing trends – at least consumers should know in advance to arrange funds to pay bills. There has been improvement in the regulator’s speed over time, however further streamlining is needed.
Otherwise, the ghosts of unit past will continue to haunt us.
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