Chief Financial Officer (CFO), Karachi Electric (KE) Aamir Ghaziani has informed the Economic Coordination Committee (ECC) of the Cabinet that the KE is purchasing 650 MW electricity from national grid at Rs 9 or Rs 10 per unit and selling it to consumers at Rs 13.50 per unit, well informed sources told Business Recorder.
He shared this information during the ECC meeting held on March 4,2020 with Advisor Finance in the chair. The sources said, initially, CFO KE wanted to mix up the issue of price by trying to state the basket price but when he was asked to tell the price, then he shared actual purchase and sell price.
The Power Division, sources said, has yet not notified the committee which will prepare recommendations for KE's determined quarterly tariff. The government wants to allow KE to increase tariff by Rs 2.89 per unit to bring it at par with other parts of the country out of determined tariff of Rs 4.87 per unit of 11 quarters.
However, no plan has so far been prepared to deal with the remaining impact of Rs 1.98 per unit, the cumulative affect of which has been calculated at Rs 71 billion. KE is of the view that the federal government should give subsidy of Rs 71 billion or allow it to pass on total determined tariff of 11 quarters.
The sources said, an amount of Rs 25 billion is lying with the Power Division for subsidy to KE.
On Multi-Year Tariff, Minister for Railways Sheikh Rashid Ahmed said that why KE did not pass on the Nepra's determined tariff to consumers? He questioned why KE went to court. On this KE's Chief Financial Officer Aamir Ghaziani said that Nepra did not determine required increase in tariff due to which the power utility went to the court. He said, 1100 days were spent on finalization of 11 quarters tariffs.
Chairman Nepra Tauseef H Farooqi raised questions on the KE's plan of new power plants based on imported coal and RLNG, saying that when surplus power is available in the national grid why KE is establishing expensive RLNG-fired power plants. KE's representative replied that new power plants with 60 per cent efficiency will replace plants of Bin Qasim whose efficiency is 29 or 30 per cent. Power Division informed the ECC that National Electric Power Regulatory Authority (Nepra) determined and recommended the multi-year tariff on July 5, 2018 for K-E under section 31(7) of Generation, Transmission and Distribution of Electric Power Acr, 1997 read with the rule 17 of the Nepra( Tariff Standards and Procedure) Rules, 1998. The tariff determined by the Nepra was dully notified by the Federal Government through SRO 576(1)/ 2019 of May 22, 2019.
Pursuant to the provisions of Nepra Act and as per the mechanism for monthly, quarterly adjustment requests on May 27, 2019 for Power Purchase Price (PPP), indexation of O&M costs, and adjustment of T&D losses etc., for eleven quarters from July 2016 to March 2019.
Nepra on December 31, 2019 determined the revenue requirement of KE for such quarters and accordingly recommended for reach category of consumer per the schedule of tariff for 11 quarters beginning from October - December, 2016 and ending on April-June, 2019.
During this period various proceedings were pending. The QTA decision of 11 quarters by Nepra evidently updates the revenue requirement of KE up to March 2019 and accounts for shortfall or over recovery during each quarter from July 2016 to March 2019. It is evident that for such period the QTA decision of 11 quarters has taken the base values specified in KE notified tariff May 22, 2019, whereas, during this period SRO No.571(1)/2016 of June 27, 2016 remained in field and accordingly subsidy claims were also made by KE and were processed by the government. Accordingly, for such period reconciliation of such claims and juxtapose alignment is required.
Power Division further informed that similarly, in view of the QTA decision of 11 quarters, the revenue requirement of KE has been actualized up to quarter ending March 2019, reflected in the latest schedule of tariff for April-June 2019 recommended by Nepra.
The comparison of the rate earlier recommended by Nepra reflected in the KE notified rate as well as the rate for each category of consumer recommended in schedule of tariff for April-June 2019 in the QTA decision of 11 quarters reflects that a tariff increase of Rs 4.87 per unit has been recommended by Nepra for each category of consumer. It was pointed out that currently on account of the provisions of the Nepra Act and applicable policies as well as guidelines developed thereunder, uniform tariff for each category of consumer for Discos is applicable pursuant to various determinations of Nepra, from time to time. KE notified tariff was also accordingly aligned. Subsequently, Nepra determined quarterly adjustments in June 2019, September 2019 and December 2019 for consumers of Discos. Consequently, currently a consolidated uniform rate with the range of Rs 1.09 to Rs 2.89 per unit was being charged for various consumers of Discos while also maintaining the socio-economic objectives for specified categories of consumers.
Power Division submitted the following proposals for consideration of the ECC ;(i) the QTA decision regarding 11 quarters be notified as recommended by Nepra which would result in subsidy claims of around Rs 71 billion up to March 2019 and from the date of notification for next 12 months the additional estimated subsidy claim would be Rs 26 billion or (iii) the recommended quarterly adjustment to the tune of Rs 4.87 per unit being the differential between the schedule of tariff recommended by Nepra for April-June 2019 and schedule of tariff earlier recommended by Nepra and reflected in the KE notified tariff, be notified for each category of consumer, as is currently in field for consumer of Discos. Any difference between the two rates be made available through subsidy, which shall amount of Rs 26 billion only. To the extent of earlier quarters, KE be intimated to file its revised claim to Nepra for such quarterly adjustments after reflecting subsidy claims already processed pursuant to SRO No 571(1)/16 of June 27, 2016 which has not been accounted for in the current determination and incremental rates for such adjustments be sought so that any such revenue requirement is recovered prospectively subject to any further subsidy (if any) as may be made available on a uniform basis.
During the ensuing discussion, it was observed that increase in tariff for KE would not only increase the cost of electricity for consumers in Karachi but also put a burden on government kitty for provision of additional subsidy to mitigate impact of the increase on consumers. There was dire need to address said issue prudently. It was suggested that a committee may be constituted to examine the issue in a holistic manner and come up to the ECC with a viable recommendations in its next meeting. The ECC agreed to the proposal and constituted a committee comprising Minister for Economic Affairs, Deputy Chairman Planning Commission, Secretary Finance and Secretary Power to prepare viable recommendations.
Comments
Comments are closed.