Fesco plea for increase rejected: Nepra cuts tariff by Rs 2.80 per unit for 5 years

The National Electric Power Regulatory Authority (Nepra) has rejected the plea of Faisalabad Electric Supply Company (Fesco) to increase power tariff and instead cut rate by Rs 2.80 per unit for next five years. The Nepra had approved a reduction in the tariff for domestic consumers by Rs 0.51 to Rs 2.80 per unit, Rs 1.50 per unit for commercial consumers and Rs 2.70 per unit for industrial consumers.
The regulator approved reduction in the tariff for agricultural consumers by Rs 2.70 per unit. Fesco has also made shocking disclosures that it had made advance payment of Rs 25 billion to Central Power Purchasing Agency (CPPA), without interest charge, which were paid to power producers to show reduction in volume of circular debt. However, it was noted that power utility faced problems in payment of subsidy amount from the government. The company also faced higher losses and low recovery of power bills.
Faisalabad Electric Supply Company (Fesco) had sought a tariff increase from the regulator as a guarantee profit to investors and encourage them to participate in privatisation of the public sector. Total transmission and distribution losses stood at 11 percent in 2014-15. Under multi year tariff, Nepra allowed losses at 9.5 percent for 2015-16, 9.36 in 2016-2017, 9.02 in 2017-18, 8.60 in 2018-19 and 9.10 percent in 2019-20.
Fesco sought a tariff increase of Rs 1 to Rs 4.91 per unit for the first year and Rs 0.58 per unit for the second year. For the next three years, it demanded an increase of only Rs 0.06 to Rs 0.17 per unit. The government has an aspiration to push up tariff for the next five years in an attempt to encourage investors to participate in bidding for the sale of Fesco. The five-year tariff will provide a guaranteed return to the investors.
However with cut in power tariff, the privatisation of Fesco may hit a stumbling block and may be further delayed. During the hearing, the Nepra chairman aired concern over the extra payment of billions to the CPPA and asked how it would be recovered after privatisation.
He noted that the Fesco management was collecting money from consumers on account of maintenance and operation cost, but the company had an obsolete system. He suggested that the government should put an end to payment of subsidy after the company's privatisation.