Consumers of some Discos subsidise consumers of other other Discos: experts

LAHORE: Consumers in distribution companies like IESCO, LESCO, FESCO, GEPCO and TESCO are subsidising consumers of SEPCO, PESCO, HESCO and QESCO by paying more than their actual determined tariffs, said power sector experts.

This inference was drawn on the basis of the weighted average of tariffs (WATF) across discos, which includes Energy Purchase Price (EPP), Capacity Purchase Price (CPP), Use of System Charges (UoSC), Prior Year Adjustments (PYA), Distribution Margins and Transmission & Distribution (T&D) losses, they said.

They said Nepra used to determine consumer-end tariffs for each distribution company (Discos) separately before the amendment to the Nepra Act in 2018. The tariff determined for each Disco was different because of its distinct characteristics including the difference in annual revenue requirement and T&D losses.

As per Standard Operating Procedure, Nepra evaluates cost and revenue requirements and sends its recommendation to the Government of Pakistan (GOP). The GOP notified the uniform tariff after adjusting for subsidies.

However, after the amendment to Nepra Act in 2018, they maintained, Nepra determines a uniform tax for distribution licensees wholly owned and controlled by a common shareholder based on their consolidated accounts, even though all distribution companies are separate corporate entities. This compromises the inefficient behaviour of some of the Discos. The government of Pakistan notifies the final applicable tariff after adjusting for subsidies.

In addition, they said, electricity utility bills are increasingly cluttered with taxes, fees, and surcharges. Consumers also pay for investment in hydro projects, a Neelum Jhelum Surcharge of Rs0.10 per unit, servicing of circular debt parked in the Power Holding Private Limited, a financial cost surcharge of Rs0.43 per unit, Sales tax @ 17 percent per unit, electricity duty @ 1.5 percent per unit and a TV fee of Rs35 per meter. Sales tax is also charged on fuel price adjustments. There are few additional taxes for non-filers of income tax. These are charged irrespective of units consumed. The proliferation of these surcharges generally shifts risks away from utility operators and investors and onto consumers. Besides increased costs to compliant consumers, surcharges can also result in more inefficiency in the distribution system.

Copyright Business Recorder, 2023