ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) has approved negative adjustment of paisa 86 per unit in FCAs of Discos to refund Rs10 billion to the consumers for August 2024.
The decision of the authority also reveals wide differences among the authority on the tariff of bagasse–fired plants approved by the authority and was made part of the CPPA-G FCA adjustment request. Member (Finance and Tariff) and other authority’s member including the chairman have written separate additional notes on the tariff of baggasse-fired power plants.
The Central Power Purchasing Agency–Guaran-teed (CPPA-G) has sought negative adjustment of paisa 55.75 per unit for the consumed units of 12,752 GWh to refund about seven billion to the consumers against billings of August 2024.The relief will be given in the bills of October 2024.
Sept FCAs: CPPA-G seeks 71 paisa per unit negative adjustment
On September 26, 2024, the authority held a public hearing to verify the data submitted by the CPPA-G, the market operator and further discuss it.
The Member (Tariff and Finance),Mathar Niaz Rana, in his additional note has stated that there has been widespread consumer criticism regarding the baggasse-based tariff, which has been deemed excessively high and decided without adequate consumer participation.
This has contributed to unexpectedly high tariffs, even surpassing local coal prices — an issue requiring urgent attention. The CPPA-G highlighted this impact during public hearings on the FCA, showing a significant increase in the bagasse tariff from June to August 2024 compared to local coal. In June, the bagasse tariff stood at Rs5.982 per kWh, remained unchanged in July 2024, but sharply rose to Rs12.48 per kWh in August 2024.
Meanwhile, the local coal tariff saw a more gradual increase from Rs11.03 per kWh in June 2024 to Rs11.33 in July 2024, and Rs12.27 in August 2024. By August 2024, the baggasse tariff had not only risen significantly but had also surpassed the local coal tariff.
The sudden spike in the bagasse tariff has raised candid consumers’ concerns, especially as consumers have also objected that they were not part of the decision-making process for this tariff.
He recommended that the negative FCA of Rs1.2628 per unit be notified, excluding bagasse-based generation claims under the revised tariff. I respectfully recommend that the authority, vested with extensive powers, take corrective action regarding its decision and promptly initiate suomoto curative proceedings under the applicable legal provisions of the NEPRA Act, NEPRA (Tariff Standards and Procedure) Rules and other relevant regulations.
As highlighted, a public hearing is essential to transparently and thoroughly assess the bagasse-based tariff, explore pricing alteratives, and address related controversies. Including these claims in the FCA, would undermine the proposed suomoto review process.
Chairman and other Authority members, in their additional joint note has stated that there is note related to Member (Tariff) note regarding the Fuel Charges Adjustment (FCA) Decision for August 2024 (“FCA Decision”), which recommends notifying a negative FCA of Rs1.2628/kWh, while excluding claims from bagasse-based generation companies.
This recommendation arises from concerns raised by a commentator during the FCA hearing on September 26, 2024, related to the absence of a public hearing for the February 7, 2024 decision (“Decision”). Member (Tariff) contends that consumers are essential parties in tariff proceedings under the Civil Procedure Code (“CPC”), and that decisions made without public hearings contravene legal provisions and court judgments.
They argue that Member (Tariff) has asserted that the bagasse-based fuel cost component experienced a significant increase in August 2024, rising to Rs12.48/kWh from Rs5.98/kWh in July 2024, and that this revised component has surpassed the fuel cost of local coal.
The comparisons made are misleading and lacks critical context. It is essential to note that the fuel cost of bagasse-based generation projects had been under adjudication since 2019 across various legal forums, including the Islamabad High Court, the NEPRA Appellate Tribunal, and Nepra itself. Pending above adjudication, the provisional fuel cost component of Rs5.98/kWh, which pertains to the year 2015, was being paid since October 2018. Therefore, making the comparison of the provisional component of 2015 with the revised component of 2024 is out of place.
Likewise, comparing this change with the monthly increase occurred in the fuel cost component of local coal power plants is not correct. Second, while a comparison has been drawn with the fuel cost component of local coal power plants, several crucial factors have been overlooked.
The fuel cost component for local coal is adjusted on a monthly basis, whereas, the fuel cost for bagasse-based generation is allowed to be reviewed on annual basis.
Additionally, the fuel cost component for local coal is subject to exchange rate fluctuations, while the bagasse component is allowed to be indexed annually to a fixed percentage of five per cent, which is significantly lower than the country’s inflation rate as well as to the rate of currency devaluation.
Furthermore, the analysis neglects the differences in efficiencies between coal and bagasse power plants, which can impact overall fuel cost.
Nevertheless, when evaluated over the yearly timeframe of FY 2023-24, it is evident that the revised fuel cost component for baggasse projects (Rs12.48/kWh) is, in fact, lower than that of average fuel cost component of local coal power plants (Rs13.76/kWh).
They maintained that since the decision has not been challenged by any party before any forum available under the law, the suo motto curative review based on submissions of the stakeholder should not be initiated in a mechanical manner and the authority must examine whether any substantial miscarriage of justice has occurred. If that is not the case, a more appropriate course is to address stakeholder feedback through a reasoned explanation of the decision, thereby, preserving the integrity of the regulatory process and ensuring transparency and predictability.
Copyright Business Recorder, 2024
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