ISLAMABAD: The federal government is likely to commence electricity tariff rebasing from January 1, each year instead of July, aimed at avoiding public ire in summer months when impact of Fuel Charges Adjustments (FCAs) and Quarterly Tariff Adjustments (QTAs) are also on higher side, well-informed sources told Business Recorder.
However, the power sector Regulator, NEPRA argues that timeframe for rebasing of tariff, effective from July 2025, has already started, therefore, it would not be practical to rebase the tariff to be effective 1st January 2025 as the regulatory process for approval of relevant documents, requires nine months’ period, as provided in the Guidelines.
The sources said the Power Division’s proposal will be considered by the Economic Coordination Committee (ECC) of the Cabinet in its forthcoming meeting.
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Nepra, determines the consumer-end tariff for Discos and K-Electric, as per Section 31 of the Regulation of Generation, Transmission and Distribution of Electric Power (Amendment) Act, 2021 read with Rule 17 of the NEPRA (Tariff Standards and Procedure) Rules, 1998. The latest uniform tariff was duly notified by the Federal Government on July 14, 2024.
In accordance with the NEPRA (Tariff Standards and Procedure) Rules, 1998 read with Part 5 of the NEPRA Determination of Consumer-end Tariff (Methodology & Process) Guidelines, 2015, the Distribution Companies (DISCOs) are required to initiate the tariff determination process by submitting their minimum filing requirements by January 31st of each year. The submission is followed by Authority’s internal meetings, public hearing, tariff determination and notification by the Government. Keeping in view the recent annual tariff determinations, the rebasing has been notified by the Government in the month of July, each year with effect from 1st July.
According to Power Division, as an unfortunate coincidence, the consumers face high Fuel Charges Adjustments (FCAs) as well as the annual tariff rebasing, simultaneously in the summer months. This increase in tariff coupled with higher consumption leads to significant hike in the consumer electricity bills of summer months which in turn results in un-affordability, public dissatisfaction and nation-wide protests in the country. The issue can be streamlined if the timing of annual rebasing is shifted from summer to winter months where the electricity consumption is lower and any tariff increase can be absorbed in consumer bills. This would result in relatively stable and sustainable electricity prices throughout the year.
The National Electricity Plan Strategic Directive 8 also stipulates that the Regulator shall also revisit the “Guidelines for determination of consumer end tariff (Methodology and Process), 2015” to enable alignment of schedule of regulatory proceedings for planning activities and rate & tariff determinations.
In view of the above, Power Division has requested ECC of the Cabinet to approve that policy guidelines be issued to NEPRA that “to revise the annual tariff determination process timelines by amending the relevant legal and regulatory framework in a way that the rebasing is notified with effect from 1st January 2025 onward, each year, after completion of all regulatory proceedings”.
On the proposal for revision in annual rebasing determination timelines, Nepra argued that as per the existing timelines stated in NEPRA Determination of Consumer-end Tariff (Methodology & Process) Guidelines, 2015, the DISCOs are required to submit their investment plan and CPPA-G is required to submit the Power Purchase Price (PPP) projections by 1st of September each year. These are required to be approved by the Authority by November 30 and, thereafter, DISCOs file their tariff petitions by January 31, which are, accordingly, decided by the Authority to ensure rebasing of tariff effective from July 01.
The Regulator further stated that in order to give effect to the time frame for rebasing, as proposed in the summary, the Guidelines need to be amended first, in order to align the time period for submission of various documents and their subsequent approvals by the Authority with the proposed timelines. The DISCOS and CPPA-G would accordingly be required to file the investment plan and Power Purchase Price report by 1st March every year.
Furthermore, tariff for DISCOs is determined from July to June, in line with their accounting year, and all annual tariff indexations/adjustments/true-ups are also allowed based on their audited accounts. Therefore, the accounting period of DISCOs would need to be changed to January to December, so that the required tariff adjustments/indexations/true ups of Deprecation, RAB, Other income, etc., are made, accordingly.
Additionally, the Multi Year Tariff (MYT) awarded to 07 DISCOs, i.e. GEPCO, HESCO, SEPCO, QESCO, TESCO, MEPCO and PESCO, would expire by June 30, 2025. The timeframe for rebasing of tariff, effective from July 2025, has already started, therefore, it would not be practical to rebase the tariff to be effective 1st January 2025 as the regulatory process for approval of relevant documents, requires nine months’ period, as provided in the Guidelines.
After explaining its position, the Authority noted that in order to implement the proposal effectively, after following due process of law, a transition period of 1 year may be incorporated in the draft summary, and shifting of rebasing of tariff from summer to winter months may be made effective from January 1, 2026.
Power Division, in its point-wise response to the observations raised in by Nepra stated: (i) regarding the power purchase price projections, Nepra has already determined the Power Purchase Price (PPP) references up to June 2025, whereas the projections for the remaining six months shall be shared by CPPA-G in due course. As for the investment plan, it is discussed that Nepra may proceed with the infield investment plan for the interim period, allowing necessary adjustments in subsequent Prior Year Adjustments (PYA); (ii) in the meantime, Nepra may initiate the necessary amendments in all relevant legal documents in order to give rebasing effect from January 1st, 2025. The National Electricity Plan Strategic Directive 8 also stipulates that the Regulator shall also revisit the “Guidelines for Determination of Consumer End Tariff (Methodology and Process), 2015” to enable alignment of schedule of regulatory proceedings for planning activities and rate case and tariff determinations; (iii) it is clarified that the proposed change pertains exclusively to adjusting the tariff control period. There is no intention to alter the existing accounting period of DISCOs, which shall remain unchanged; and (iv) keeping in view the historical practice, NEPRA may consider allowing an interim tariff to the DISCOS. Thereafter, any necessary adjustments arising from this interim arrangement can be incorporated into the subsequent Prior Year Adjustments (PYA) to ensure alignment with regulatory requirements.
“We believe Power Division’s responses adequately address the observations outlined by Nepra. A prompt resolution of these matters will ensure the seamless implementation of the revised annual tariff rebasing timeline,” Power Division said adding that going forward during this process, any technical /legal issues in implementation of it shall be mutually resolved by NEPRA and Power Division.
Copyright Business Recorder, 2025