Tariff determinations by Discos: government approaches Nepra for reconsideration

Federal government has reportedly approached National Electric Power Regulatory Authority (Nepra) for reconsideration of Discos' tariff determinations, which according to the officials, are unfair in all aspects.
A couple of months ago, Nepra had determined tariffs of different Distribution Companies (Discos) by setting aside some of the prayers of the companies and recommended the government lowers tariff. However, Discos did not accept the tariff determinations and filed review petitions within the prescribed time. Nepra accepted some of the demands of Discos and allowed them financial benefit of Rs 5 billion.
Well informed sources told Business Recorder that the Discos are still dissatisfied with the determinations given by Nepra on review tariff petitions.
"As the Discos have exhausted legal right to challenge Nepra's decisions, federal government has filed reconsideration request to the regulator," the sources added.
In reply to a question an official told this scribe that Nepra was urging Discos to conduct third party audit of losses aimed at providing the regulator a fair ground to allow losses.
"We have conducted third party audit, according to which losses are around 18-19 per cent whereas Nepra is allowing 15 per cent losses which is unfair. The impact of 18-19 per cent losses means Rs 23 billion financial losses to the Discos,' the official added.
Nepra, in its determinations, also directed Discos to ensure 100 per cent recovery whereas Discos' recovery is around 94 per cent. The financial impact of this decision is Rs 43 billion.
Discos are also making a hue and cry against Nepra's decision to pay Rs 63 billion to the consumers - money overcharged previously by not passing on actual impact of fuel price adjustment on to consumers.
Discos argue that they are returning the amount of fuel price adjustment to the consumers, the sources continued.
Islamabad Electric Supply Company (Iesco), in its review petition had submitted the following requests to the regulator: allow sufficient time to ensure quality work on the T&D loss study, currently in completion phase and if considered appropriate to allow the Petitioner to undertake a separate T&D loss study for the projected years from an independent third party; (ii) allow recruitment of 6,317 personnel as an immediate provisional relief while recruitment for the projected years may kindly be considered once the study from an independent third party is completed; (iii) allow the proposed adjustments with regard to other O&M base cost; (iv) allow the proposed adjustment with regard to additional recurring O&M cost due to Investment Projects; (v) consider the repair and maintenance cost for the base year (FY 2015-16) in line with actual historical cost, inflationary impact and resultant increase due to expansion of network; (vi) allow the actual cost of debt ie 16.15%;(vi) allow the outstanding supplementary charges; (vii) allow prior year adjustment since the auditor certificate regarding negative adjustment of sales revenue has been submitted; and (ix) reconsider the AIR bulk tariff for KPK.
Faisalabad Electric Supply Company (Fesco) requested the authority to reconsider its decision to the extent of following issues: ( i) to revise T&D losses target ie 10.90%,10.56%, 10,40%, 10.15% and 9.98% for FY 2015-16 to 2019-20 respectively;( ii) to allow the recruitment plan of 3,094 persons with financial impact of Rs 476 million; (iii) to allow the creation of divisions/ sub-divisions with financial impact of Rs 1.432 million; (iv) to allow bifurcation of operations and maintenance (O&M) costs into controllable and uncontrollable ie rent and regulatory fees; (v) to allow revision of adjustment mechanism for O&M costs ie efficiency factor "X" may be revised at 0% for first three years and 0.5% and 1% for last two Years; (vi)to determine repairs and maintenance (R&M) expenditure through a K factor at 3.0% of GFA; (vii) to revise Weighted Average Cost of Capital (WACC) by taking into account a higher risk and expectation of return on equity as well as lower weightage of debt in the capital structure. WACC @ 18.91% based on RoE @ 24.13% and cost of debt @ 16.67% may be allowed; ( viii) to reconsider petitioner's earlier decision regarding prior year adjustment and allow the amount of Rs 4.827 billion for the inconsistent application of previous multi-year tariff and Rs 6.186 billion as supplementary charges; ix) to allow independent treatment of LPS and mark up payable to CPPA (G);( x)to allow Z-factor for extra ordinary events; (xi) performance standards be revised; and (xii) to revisit the peak and off peak rates of tariff.
Peshawar Electric Supply Company's (Pesco) motion for review has been based on the following issues: (i) to rationalise the target of Transmission & Distribution Losses; (ii) to revise the sales growth target; (iii) to revise the allowed distribution margin; (iv) to include the late payment charges in the prior year adjustment; (v) to allow financial charges on loans obtained through PHPL; (vi) to allow the supplementary charges; (vii) to consider the recommendation of the sub-committee for AJK tariff; and (viii) to review the average sale rate upward.