ISLAMABAD: The government is likely to increase base tariff by Rs 6.25 per unit from July 1, 2022 and Rs 1.66 per unit from October 1, 2022 which will result in targeted tariff differential subsidy of around Rs 231 billion for Discos, sources close to Minister for Power told Business Recorder.
Power Division is to approach Nepra to share the details, sources said. Power Division informed the ECC on June 13, 2022 that in pursuance of guidelines approved by ECC, National Electric Power Regulatory Authority has been determining the uniform tariff to be charged from the consumers, including the impact of subsidy and inter Disco tariff rationalization/cross subsidies, under the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 (Nepra Act, 1997). The uniform tariff in field for Distribution Companies was determined by the Authority through its determination of February 12, 2021 and has been notified.
National Electricity Policy, 2021 approved by the Council of Common Interest (CCI) provides under clause 5.6.1 that financial sustainability of the sector is premised on the recovery of full cost of service, to the extent feasible, through an efficient tariff structure, which ensure sufficient liquidity in the sector and vide Clause 5.64, it states that “in due course financial self-sustainability will eliminate the need for government subsidies (except for any subsidies for feline, industry or agriculture consumers, as per prevailing government considerations”.
It further stated that in view of various parameters, including (a) the socio-economic objectives, (b) budgetary targets in field, and (c) recommendations of the Regulator with respect to consumer end tariff for each state owned distribution company, the government may continue to propose uniform tariff across consumers and regions in pursuance thereto, the Regulator shall, in consumer interest determine a uniform tariff inclusive of quarterly adjustments for all the state owned distribution companies.
Under section 31(4) of the Nepra Act, “the Authority shall, on the basis of uniform tariff, application, determine a uniform tariff for public sector licencees, engaged in supply of electric power to consumers, in the consumer’s interest on the basis of their consolidated accounts”.
Nepra, in its determinations for Discos of June 2, 2022, has determined revenue requirements of each of the Discos, based on their individual accounts. In light of these determinations, Nepra has recommended different schedules of tariff under section 31 (4) of the Nepra Act, 1997 and the National Electricity Policy, 2021. A uniform tariff based on the consolidated revenue requirement approved and determined by Nepra for Discos and targeted Tariff Differential Subsidy (TDS), proposed the following two options: Option-1 pass on Rs 7.91 per unit on national average basis to the consumers with effect from July 01, 2022 which will result in targeted tariff differential subsidy of around Rs 184 billion for Discos.
Option 2: pass on Rs 6.25 per unit of this increase to the consumers with effect from July 01, 2022, whereas passing on the remaining Rs 166 per unit to the consumers from October 01, 2022. This will result in targeted tariff differential subsidy of around Rs 231 billion for Discos.
Further, in accordance with the National Electricity Policy, 2021, the government may maintain a uniform consumer-end tariff for K-Electric and state-owned distribution companies (even after privatisation) through incorporation of direct/indirect subsidies. Accordingly, KE applicable uniform variable charge is required to be modified to recover the revenue requirements of KE determined by Nepra keeping in view the proposed targeted subsidy and cross subsidies, which will also be consistent with the proposed uniform national tariff of Discos.
The impact of determinations on average consumer tariff is Rs 7.91 per unit.
Power Division submitted following proposals for consideration and approval of ECC of the Cabinet: Proposal 1: pass on Rs 7.91 per unit to the consumers with effect from July 01, 2022. The targeted tariff differential subsidy/cross subsidy and tariff rationalization to be incorporated to ensure the uniform tariff is Rs 184 billion for Discos.
The uniform tariff of Discos owned and controlled by the federal government, being reflective of economic and social policy of the federal government and based on the consolidated revenue requirement approved and determined by Nepra for Discos (inclusive of targeted subsidy and inter-distribution companies tariff rationalization) be approved for submitting to Nepra for reconsideration in terms of section 31(4) of the Act. The uniform tariff so determined by Nepra and recommended by it as “final tariff” for notification in the official gazette, be notified to the extent of modification and super session of existing notified rate (inclusive of subsidy/tariff rationalization surcharge) in SROs 182 to 191 (1)/2021 of February 12, 2021, as amended vide SROS 1280 to 1289(/2021 dated October 01, 2021, and SROs 1419 to 1428 (0)/2021 dated November 05, 2021. The tariff rationalization by way of adjustments be approved for K-Electric to maintain uniform tariff across the country. On the same pattern of Discos, Nepra may be approached to issue revised Schedule of Tariff (SoT) determined for the Quarter October to December 2021 with prospective application of GoP rates after incorporating tariff rationalization and upon approval of Nepra, notify the same in the official gazette by way of modification in SRO Nos 1429/2021, 192(0)/2021, 1037(1/2020 and 575(11/2019.
Proposal 2: pass on Rs 6.25 per unit of this increase to the consumer with effect from July 01, 2022, whereas passing on the remaining Rs 1.66 per unit to the consumers from October 01, 2022. This will result in targeted tariff differential subsidy of around Rs 231 billion for Discos.
The uniform tariff of Discos, owned and controlled by the federal government, being reflective of economic and social policy of the federal government and based on the consolidated revenue requirement approved and determined by Nepra for Discos (inclusive of targeted subsidy and inter-distribution companies tariff rationalization) be approved for submitting to Nepra for consideration in terms of section 31(4) of the Act.
Copyright Business Recorder, 2022