ISLAMABAD: The Finance Division has reportedly termed the proposed four-month electricity ‘winter package’ for industry on incremental consumption as “vague and in violation of international commitments,” well-informed sources in Finance Division told Business Recorder.

Power Division tailored three options for country-wide implementation of the four month (November 2023 to February 29, 2024) winter package for industrial electricity consumers on incremental consumption, which however, will hit other categories of consumers.

For option-1, Power Division has proposed relief from Rs 3.32 per unit to Rs 7.86 per unit, option-2 Rs 8.57 per unit to Rs 14.13 per unit and option 3, from Rs 12.28 per unit to Rs 17.84 per unit. Power Division argues that any increase in electricity demand during winters will not only enable optimum use of system generation capacity but will also help in reducing gas demand due to shifting of favorable demand towards electricity.

Industrial consumers: Three options tailored for ‘winter package’

Power Division also explained that power sector’s medium term operational roadmap as envisioned under approved National Electricity Plan, approved by Federal Cabinet in August 2023 provides that “incentive mechanisms/schemes shall be utilized as a tool to facilitate accelerated energy transition and economic growth. Such mechanisms shall account for: (a) predictability through consistency of policy directives; (b) cross sectoral integration and optimization; (c) efficient utilization of resources; and (d) regional competitive tariffs for productive consumer.

Considering the background, an incentive package is proposed for all industrial consumers of Discos and K-Electric for winter months, ie, from November 1, 2023 till February 29 2024, with the following provisions:

A: The package will be applicable to both single and three phase industrial consumers for both peak and off-peak hours but for three phase consumers the sum of energy consumed in peak and off-peak hours must be greater than the aggregate benchmark consumption (peak + off-peak sales) for the relevant month;

B: Benchmark consumption will be based on the historical consumption of 3 years for the relevant months as per previous formula.

C: Impact of FCA to be passed on to the industrial consumers on incremental sales as per the applicable mechanism.

D: No quarterly adjustments and FC Surcharge would be applicable on incremental consumption.

E: Any further adjustment due to incremental consumption shall be pooled and passed on to all the consumers under the applicable adjustment mechanisms;

F: No quarterly adjustments and FC Surcharge would be applicable on incremental consumption.

G: The Package is subsidy neutral. However, it may result in an incremental load management of 1 hour for two other categories of consumers.

H: Any further adjustment due to incremental consumption shall be pooled and passed on to all the consumers under the applicable adjustment mechanisms.

I: The Package is subsidy neutral.

Based on assumptions, various options have been worked out, with impact of tariff on other categories for consideration of CCoE to opt for any one option.

Option A: Tariff of 36.54 Rs/kWh shall be charged to all industrial consumers on the respective incremental consumption, above the benchmark consumption in the corresponding months; Or Option B: Tariff of 30 Rs/kWh shall be charged to all industrial consumers on the respective incremental consumption above the benchmark consumption in the corresponding months, which may result in an estimated positive adjustment of 0.26 Rs/kWh in the end consumer tariff of all the baseline consumers. Or Option C: Tariff of 26.29 Rs/kWh shall be charged to all industrial consumers on the respective incremental consumption, above the benchmark consumption in the corresponding months, which may result in an estimated positive adjustment of 0.44 Rs/kWh in the end consumer tariff of all the baseline consumers.

Power Division further stated that marginal rate of KE is Rs 41.62 kWh. However, the uniform package shall be applicable to all industrial consumers of K-Electric on incremental consumption, with any further adjustment to be parked under the existing mechanism to all the KE consumers.

Copyright Business Recorder, 2023