The National Electric Power Regulatory Authority (NEPRA) announced the other day wide-ranging reductions in the power rates of Islamabad Electric Supply Company (Iesco) and Gujranwala Electric Power Company (Gepco), which will be applicable for five years.
The enforcement of new rates will take effect from the date of gazette notification by the federal government's approval. The reductions have turned out to be quite substantial particularly in the case of commercial, industrial and agricultural consumers, which indicates that these two companies have been rather overcharging the consumers in these categories hitherto.
The revision in the case of Islamabad Electric Supply Company (Iesco) slashed the rates for commercial consumers by so much as Rs 2.41 per unit (Kwh), by 72 paisa per unit for industrial consumers and by 79 paisa per unit for agricultural consumers.
The domestic consumers using less than 300 units per month will get the benefit of reduction by 14 paisa per unit.
The cuts in the tariffs of Gujranwala Electric Power Company (Gepco) include Rs 1.04 per unit, 79 paisa per unit and 52 paisa per unit for commercial, industrial and agricultural consumers respectively while the domestic consumers with consumption up to 300 units per month have been allowed a reduction of 3 paisa per unit.
According to NEPRA's notification, the downward revision in the power tariffs of the above two companies has been determined in the light of the prudent estimates of the costs of transmission and distribution services.
The statement is reflective of the fact that the NEPRA undertook a deeper examination of the entire cost structure as brought out in the accounts of the two companies in order to arrive at a reasonable rate of profit margin for each. The substantial slashing of the rates has thus brought into focus the fixation of power charges at high levels so far by these companies.
The laudable performance of NEPRA as a watchdog over the operations and tariff structures of the power supply companies thus deserves commendation.
It is not clearly spelt out in NEPRA's statement as to what margin of profit against the sales income of the companies or in relation to their net assets, has been allowed. It has been pointed out by NEPRA that these companies may further improve their profits by reducing line losses over the years to come.
Further, since these companies cater for a large segment of industrial consumers whose number is rapidly increasing, they may expect further improvement in their profit margin. The reaction of Iesco and Gepco to the NEPRA's decision is not get known.
It may be expected that extension of probe by NEPRA into the operations and cost structures of other power supply companies in different regions of the country, would result in similar cuts in the power rates. So far WAPDA has been singularly the target of criticism for the relatively high electricity charges in the country but now it has been found that regional power supply companies which are operating in the public sector, are also to blame for high power tariff structures.
Moreover, the wide difference in the power structures of various power supply companies, is also a factor that affects the power cost of industrial consumers in different regions, which leads to substantial difference in the cost of production in industries located in different regions of the country. As may be foreseen, a power supply company operating with old and obsolete equipment and transmission lines would suffer larger line losses and therefore it would not be able to bring down its power rates as can a company having not so old equipment and transmission lines.
The KESC is one of the glaring examples of old and obsolete transmission lines and consequently cannot avoid transmission losses.