ISLAMABAD: The Power Distribution Companies (Discos) and K-Electric (KE) are set to reduce their tariffs by about Rs 2 per unit for the second quarter (October-December) of 2024-25 due to a negative adjustment of Rs 52.057 billion.
However, this decision is contingent on an investigation into the “doubtful” booking of Rs 2 billion in the Quarterly Tariff Adjustment (QTA) by the Hyderabad Electric Supply Company (Hesco).
The Authority, chaired by NEPRA Chairman Waseem Mukhtar, conducted three public hearings on Wednesday regarding the QTA for the second quarter of 2024-25, policy guidelines for rationalizing tariffs for EV charging stations, and the operating reserve policy of NTDC.
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During these hearings, both the Authority and consumers raised questions, particularly regarding the EV charging stations policy and the applicability of the QTA.
A NEPRA case officer explained that the main reason for the negative adjustment of Rs 52.057 billion in the QTA was a savings of Rs 12 billion from terminating contracts with five Independent Power Producers (IPPs), which reduced capacity payments, Rs 18 billion from the re-profiling of loans for K-2 and K-3, and a substantial reduction in interest rates. Of the total negative adjustment, Rs 50.563 billion was related to capacity payments.
NEPRA’s Member (Tariff) pointed out that the primary cause of the negative adjustment in the QTA was the reduction in interest rates and directed the relevant officials to provide more details on the adjustment.
According to data shared with NEPRA, the following negative adjustments have been requested by the various Discos for the second quarter: Islamabad Electric Supply Company (IESCO) has sought negative adjustment of Rs 4.478 billion for the second quarter ; Lahore Electric Supply Company (LESCO) negative adjustment of Rs 9.632 billion , Gujranwala Electric Power Company (GEPCO) negative adjustment of Rs 6.498 billion , Faisalabad Electric Supply Company (FESCO) negative adjustment of Rs 10.989 billion, Multan Electric Power Company (MEPCO) negative adjustment of Rs 10.628 billion, Peshawar Electric Supply Company (PESCO) negative adjustment of Rs 2.218 billion, Hyderabad Electric Supply Company (HESCO) positive adjustment of Rs 427 million, Quetta Electric Quetta Supply Company (QESCO) negative adjustment of Rs 1.772 billion , Sukkur Electric Supply Company (SEPCO) negative adjustment of Rs 2.959 billion and Tribal Electric Supply Company (TESCO) negative adjustment of Rs 3.308 billion .
The total requested amount for variable O&M is Rs 2.691 billion, Use of System Charges (UoSC) and Market Operator Fee (MOP) negative Rs 1.318 billion, impact of T&D losses on monthly FCA, negative Rs 2.664 billion and impact of incremental units negative Rs 2.248 billion.
The total requested amount for variable O&M is Rs 2.691 billion, while the Use of System Charges (UoSC) and Market Operator Fee (MOP) show a negative adjustment of Rs 1.318 billion.
The impact of T&D losses on the monthly Fuel Cost Adjustment (FCA) is negative Rs 2.664 billion, and the impact of incremental units is negative Rs 2.248 billion.
HESCO also requested Rs 2.045 billion for the uncovered cost of Small Power Producers (SPPs), a claim that raised concerns among the Authority and consumers. The Authority has ordered an investigation into the claim, as one of the interveners suggested it may be fraudulent.
Aamir Sheikh from Lahore urged the Authority to release the decision as soon as possible so that the negative adjustment can be passed on to consumers starting in February.
Tanveer Barry, representing the Karachi Chamber of Commerce and Industry (KCCI), commented that while contracts with some IPPs had been terminated and others revised, the benefits for consumers were not as high as expected.
According to statements from the Prime Minister and the Power Minister, consumers nationwide were supposed to benefit by up to Rs 7 per unit, but the industry was only seeing a benefit of Rs 2 per unit.
Additionally, quarterly adjustments for Discos apply to consumers of KE, but KE is not filing quarterly adjustment requests because its multi-year tariff has not been approved. Instead, KE is submitting provisional Fuel Cost Adjustments (FCA), which have been approved by NEPRA.
EV Charging Stations: Regarding the government’s motion and policy guidelines for rationalizing tariffs for Electric Vehicle (EV) charging stations, representatives from Hubco Green, Attock Petroleum, Arzachel Pvt. Limited, and Arif Bilwani criticized the policy as “confused” due to the overlap of roles among different federal and provincial entities.
The government aims to reduce the base tariff for EV charging stations from Rs 45.55 per unit to Rs 23.57, excluding existing taxes and adjustments. However, vendors of EV charging stations will be free to set their own rates for consumers.
Additional Secretary of Power Mehfooz Bhatti, CPPA-G representative Naveed Qaisar, and Managing Director of NEECA defended the policy and answered questions from the Authority and consumers.
NEPRA Members Mathar Niaz Rana (Tariff), Member (Law), and Member (KPK) raised several questions regarding the proposed mechanism and the criteria for establishing EV charging stations. Arif Bilwani asked about the impact of cross-subsidies on other consumers.
Naveed Qaisar explained that the government projects annual sales of Rs 814 billion from EV charging stations, with a cross-subsidy amounting to Rs 9.85 billion (Rs 22 per unit). The incremental sale impact would be Rs 0.18 per unit, reducing the cross-subsidy for other consumers by Rs 0.11 per unit, resulting in a net impact of Rs 0.07 per unit.
Arzachel Pvt. Limited’s representative mentioned that there is a disconnect in the policy, which is causing confusion among investors who wish to establish EV charging stations. Other interveners expressed similar concerns.
Operating Reserve Policy of NTDC: In the public hearing regarding NTDC’s petition for its operating reserve policy, Authority members expressed concerns that NTDC plans to continue the “Take or Pay” mechanism for operating reserves to stabilize its system, a cost that would ultimately be borne by consumers.
NTDC representatives argued that the rise of net metering has destabilized the system, requiring them to maintain reserves to ensure stability in case of fluctuations. This could result in NTDC continuing to book electricity under this policy, and consumers would have to pay for standby power plants.
The Authority will announce its determinations on these three cases after thorough examination and verification of the records presented.
Copyright Business Recorder, 2025
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