Quarterly adjustment of FY-2019-20: 17 paisa/unit increase in tariff of Discos likely

National Electric Power Regulatory Authority (Nepra) on Wednesday reserved determination on 17 paisa per unit increase in tariff of power Distribution Companies to recover additional Rs 17.204 billion from consumers on account of variation in Power Purchase Price (PPP) for the quarter July to September 2019. Presided over by Chairman Nepra, Tauseef, H Farooqi, the Authority did not raise substantive questions to Power Division and representatives of Discos. Nepra officials only enquired from representative of Peshawar Electric Supply Company (Pesco) about over Rs 3.5 billion claims with respect to Fuel Cost Component (FCA), who clarified that this was a difference between purchase and sold units.

The government had agreement with the International Monetary Fund (IMF) that electricity tariff will be adjusted each quarter to pass on the inefficiencies and other expenditures to the consumers.

According to the petition, Iesco has sought adjustment of Rs 1.445 billion on account of capacity purchase price, UoSC & MoF, impact of T&D losses on monthly FCA, and variable O&M, Lesco Rs 5.052 billion, Gepco, Rs 1.536 billion, Fesco, Rs 946 million, Mepco, Rs 2.215 billion, Pesco Rs 3.669 billion (including FCA component of Rs 3.512) billion, Hesco, Rs 2.506 billion, Qesco Rs 1.529 billion, Sepco, Rs 1.190 billion and Tesco, Rs 991 million.

CEO, CPPA-G, Abid Lodhi stated that Discos had sought adjustment of Rs 19.2 billion in first quarter of current fiscal year, which has been rationalized at Rs 17.2 billion. Power Division, in a letter, requested Nepra to immediately reflect the impact of 1st quarter of FY 2019-20 on uniform basis in the monthly bill of consumers of all Discos till its final recovery.

An official told Business Recorder that an increase of 17 pisa per unit in tariff on account of quarterly adjustment is expected to be notified in December 2019. This will be recovered in one year. Power Division further maintained that any excess and less adjustment would be settled between Discos at CPPA-G level.

Joints Secretary (Power Finance) Zargham Eshaq Khan briefed that the Authority has already regularized quarterly adjustment as a mechanism. The government has already notified and adjusted three quarters and this adjustment is related to first quarter of current fiscal year.

"The government has staggered annual tariff increase in quarters instead of end of the adjustment," he added.

One of the interveners stated that the consumers have been crushed due to higher tariff. At this Zargham Eshaq Khan responded that if the cost is prudent, then it should be passed on to the consumers as cost of services to be borne by the end consumers. He acknowledged that electricity prices are high but the government was bound to the policies according to which the prices are fixed. He said Renewable Energy Policy has been cleared by the Cabinet and will now be submitted to the Council of Common Interests (CCI). He further stated that draft National Energy Policy (NEP) has been prepared which will be shared with provinces for consultation and as this policy is approved and implemented, prices will be revised down. However, when Chairman Nepra enquired about the impact of new policies on tariff, Zargham Eshaq Khan replied that impact has not been calculated.

"Prices need to be revised but the revision and implementation of that revision will take some time," he continued.

Chairman Nepra sought clarification on the timeline about revision in electricity prices.

A couple of months ago the government increased power tariff by 53 Paisa per unit to recover Rs 120 billion from consumers - around Rs 63 billion from power consumers on account of quarterly adjustments, distribution margin indexation, inflation and exchange rate. The regulator allowed around Rs 33.5 billion under quarterly adjustment and Rs19.77 billion interim relief to Discos.

One of the Nepra members enquired about efficiency plan for Discos as there was no such plan with respect to losses. Zargham Eshaq Khan stated that regulator gives loss target to Discos and the difference with the actual targets by the companies are met by the government through commercial borrowing.

Member asked if the regulator revises the target of losses, would the government bear that burden, Zargham Eshaq Khan replied that the regulator always allows prudent burden keeping in view it is in accordance with ground realities.

The regulator is also expected to notify Rs 2.83 per unit increase in power under monthly fuel price adjustment which will be billed in December.