The National Electric Power Regulatory Authority (Nepra) has reduced KESCs electricity tariff by four (4) paisa per unit across the board, except lifeline and agriculture consumers. However, the tariff for the consumers of Pepcos distribution companies (Discos) has been raised to Rs 1.21 per unit for the month of February, 2009, applying monthly adjustment formula.
According to the determinations, upward revision per unit for Quetta Electric Supply Company (Qesco) consumers is 4 paisa, for Gujranwala Electric Supply Company (Gepco) 8 paisa, Islamabad Electric Supply Company (Iesco) 23 paisa, Multan Electric Supply Company (Mepco) 48 paisa, Peshawar Electric Supply Company (Pesco) 56 paisa, Lahore Electric Supply Company (Lesco) 68 paisa, Faisalabad Electric Supply Company (Fesco) 87 paisa, and Hyderabad Electric Supply Company (Hesco) Rs 1.21 per unit.
Karachi Electric Supply Corporation Limited (KESC), in its communication on February 9, 2009 had sought tariff adjustment for the quarter October-December 2008. The utility claimed that the variation in fuel cost due to fuel price variation worked out to be negative Rs 3,602 million, or minus 32.23 paisa per unit, while variation in cost of purchase of power was calculated to be Rs 3,274 million, or 29.29 paisa per unit.
The net combined effect had thus been worked out to be negative Rs 328 million, or 2.94 paisa per unit. KESCs request for tariff adjustment was based on following facts: (i) rate for purchase of power from National Transmission and Dispatch Company (NTDC) for the month of October 2008 had been taken as Rs 3.69 paisa per unit;(ii) application of average rate ( basket rate of (NTDC) for purchase of power from NTDC with effect from November 2008 in accordance with determination of the Authority as notified by the GoP on October 30, 2008.
Additionally, KESC through its subsequent communication on February 23, 2009 also requested for adjustment of Rs 6754 million on account of loss in the revenue due to four percent cap which was not allowed by the Authority in its previous determination for quarterly adjustment in tariff (July-September) issued by the Authority on January 20, 2009.
Nepra evaluated the data provided by the KESC to estimate the impact of variation in fuel prices to be passed on to the consumers. According to the information submitted by KESC, the variation in the cost of fuel due to fuel price variation at KESCs own generation system for the quarter October-December 2008, worked out to be minus Rs 3662 million or decrease in KESCs consumer end tariff by paisa 33.46/kWh.
The aforesaid reduction in the fuel cost from that of the previous quarter occurred primarily due to decrease in the price of furnace oil purchased and consumed by KESC at its own operated generating units during the current quarter and, therefore, approved by the Authority.
The determination further showed that KESC had applied a rate of paisa 369/kwh for working out variation in the cost of power purchased from NTDC during the month of October 2008, which is not consistent with the previous decision of the Authority dated April 14, 2003 whereby NTDC has been allowed to charge KESC on the basis of marginal cost.
Accordingly, variation in cost of power purchased from NTDC had been reworked on the basis of marginal cost rate for October 2008 as minus Rs 635 million and adjusted against the leftover (unadjusted amount) of Rs 35820 million (Authoritys determination for the quarter July-September 2008). The net unadjusted amount worked out to be Rs 35185 million (Rs 35820-Rs 635).
The Authority observed that the dispute between NTDC and KESC over the past arrears on the basis of marginal rate was under consideration by a committee already constituted by GoP, and as such decided not to adjust any amount pertaining to accumulated arrears on account of purchase of power by KESC from NTDC on marginal cost basis.
As per determination of the Authority already notified to GoP on October 30, 2008, KESC is required to pay NTDC at an average rate (basket rate of NTDC) for the purchase of power from NTDC, with effect from November 01, 2008. Accordingly, the variation in the power purchase cost for the quarter under review has been worked out Rs 3274 million or paisa 29.91/kWh.
Since, KESC has not been allowed adjustment in its tariff for the accumulated amount of Rs 35820 million on account of variation in cost due to the marginal cost rate as stated in the preceding paragraph, therefore for KESC to fulfil its obligations for payment of power purchases from NTDC at the average rate (basket rate of NTDC), the Authority has decided to adjust Rs 3274 million or paisa 29.91/kwh in KESCs tariff.
According to the determination, KESCs request for adjustment of loss in revenue of Rs 6754 million was considered by the Authority in its last determination for quarterly adjustment in KESCs tariff dated January 20, 2009 and it was then decided that KESC did not qualify for such adjustment of loss in revenue due to the reason that the mechanism for adjustment in tariff was due to fuel price variation and the mechanism for adjustment in tariff due to power purchase cost variation already approved by the Authority and notified by GoP does not allow for adjustment of such loss in revenue.
Further, the Authority has already adjusted the cumulative leftover (unadjusted) amount of the previous quarters in its last determination for KESC quarterly adjustment in tariff for the quarter July-September 2008.
The Authority, therefore, maintains that any loss to the utility either actual or implied which is not covered under the approved mechanism for adjustment in KESCs tariff can not be considered a pass through cost and adjusted in KESCs tariff.
The Authority, therefore, maintains its previous decision on the matter. The Authority further determined that the net combined effect, while incorporating both variations ie the fuel price variation as well as the variation in the purchase for the quarter October-December 2008 came out to be minus Rs 388 million or negative Paisa 3.55/kwh.
In order to compensate KESC on account of variation in the fuel price and the cost of purchase of power for the current quarter (October- December 2008), the Authority decided to allow a uniform decrease KESCs consumer-end tariff by paisa four (4) per kWh for all consumer categories, except for the life-line consumers consuming up to 50 units per month and the agriculture consumers (category D-1 and D-2). The revised tariffs of Discos and KESC will be implemented after notification in the official gazette of Pakistan.