ISLAMABAD: The Power Division is said to have submitted an altered proposal to the federal Cabinet to slash rates for consumers having low utilisation in certain months that are impacted significantly by applicability of fixed charges at the rate of 50 per cent of sanctioned load.
The Power Division has also recommended revising the application of fixed charges at the rate of 25 per cent of the sanctioned load, well-informed sources told Business Recorder.
The National Electric Power Regulatory Authority (NEPRA) has determined the revenue requirements of each Disco, based on their individual accounts vide its determinations of June 14, 2024, and has intimated its determination to the federal government for the purpose of notification in the official gazette pursuant to Section 31(7) of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997, within 30 days from the date of the decision.
The National Electricity Policy, 2021 approved by the Council of Common Interests (CCI) provides under Clause 5.6.1 that “financial sustainability of the sector is premised on the recovery of full cost of service, to the extent feasible, through an efficient tariff structure, which ensures sufficient liquidity in the sector” and vide Clause 5.6.4 it states that in due course, financial self- sustainability will eliminate the need for government subsidies (except for any subsidies for lifeline, industry or agriculture consumers, as per prevailing government considerations).
The policy further states that in view of various parameters, including (a) the socioeconomic objectives; (b) budgetary targets in field; and (c) recommendations of the regulator with respect to consumer-end tariff for each state-owned distribution company, the government may continue to propose uniform tariff across the consumers and regions. In pursuance thereto, the regulator shall, in consumer interest, determine a uniform tariff (inclusive of quarterly adjustments) for all the state-owned distribution companies. Additionally, the government may maintain a uniform consumer-end tariff for K-Electric and state-owned distribution companies (even after privatisation) through incorporation of direct/indirect subsidies.
In its determinations, the NEPRA has increased the fixed charges from Rs200-500/kW/month to Rs500-2,000/kW/month in order to align the sector’s cost and recovery structures.
However, after considering frequent representations made by the consumers regarding a heavy increase (up to 400 per cent) in fixed charges, the Power Division has recommended that the fixed charges may be increased to Rs400-1,250/kW/month only in the instant determination as per Annex-V and the variable rates may be adjusted accordingly.
Further, the consumers having low utilisation in certain months are impacted significantly by applying fixed charges at the rate of 50 per cent of the sanctioned load.
The Power Division is also recommended to revise the application of fixed charges at the rate of 25 per cent of the sanctioned load.
Currently, the national average uniform applicable base rate on revised sale mix is Rs28.44/unit which would be increased to Rs32.99/unit after a net increase of Rs4.55/unit (including rebasing and tariff rationalisation). If the rebasing is applied with effect July 1, 2024, the amount of tariff differential subsidy is expected to be around Rs266 billion.
No increase has been proposed for the domestic non-ToU lifeline consumers, whereas, the rate for industrial consumers has been maintained at last year level in an effort to reduce the cross-subsidy burden.
Similarly, the tariff for AJ&K has also been reduced to arrive at the cost of service. In line with NEPRA’s decisions, the Power Division moved a summary for the cabinet on June 14, 2024. During MEFP discussions with the IMF certain issues were highlighted related with cross-subsidies. Accordingly, after detailed discussions between Power Division, Finance Division and other stakeholders, the tariff schedules have been modified.
The request for withdrawal of the summary moved on June 14, 2024, has separately been submitted to the Cabinet Division.
The following proposals are submitted for consideration of the Cabinet; (i) approve the uniform tariff of XWDISCOS, owned and controlled by the Federal Government, being reflective of economic and social policy of the federal government and based on the consolidated revenue requirement approved and determined by NEPRA for Discos (inclusive of targeted subsidy and inter-distribution companies tariff rationalisation); (ii) approve policy guidelines to NEPRA for reduction of fixed charges under the head GoP Uniform Applicable Fixed Charges and adjust the variable rate accordingly. Further, the application of fixed charges at the rate of 50 per cent of the sanctioned load be revised to 25 per cent of the sanctioned load;(iii) authorise Power Division for submission of reconsideration/uniform tariff application request to NEPRA in terms of Section 31 of the Act;(iv) authorise Power Division to notify the uniform tariff so determined by NEPRA and recommended by it as “final tariff” for notification in the official gazette, with effect from July 1, 2024, to the extent of modification and supersession of existing notified rate (inclusive of subsidy/tariff rationalisation surcharge) in SROs 374 to 383 (1)/2018 dated March 22, 2018 as amended vide SROs 182 to 191 (1)/2021 dated February 12, 2021, SROs 1280 to 1289 (1)/2021 dated October 01, 2021, SROs 1419 to 1428 (1)/2021 dated November 05, 2021, SROs 981 to 990 (1)/2022 dated July 05, 2022, SROs 1165 ; and (v) on the same pattern of XWDISCOS, authorise Power Division to approach NEPRA for issuance of revised Schedule of Tariff for K.E, after incorporating tariff rationalisation, and upon approval of NEPRA, to notify the same with effect from 1st July 2024, in the official gazette by way of modification in SRO No 575 (I)/2019 as modified from time to time.
Copyright Business Recorder, 2024
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