National Electric Power Regulatory Authority (Nepra) has allowed Discos and CPPA-G to increase power tariff by Rs 0.53 per unit to recover Rs 53 billion from consumers across the board. The Authority determined tariffs of seven Discos for the FY 2016-17 & FY 2017-18 individually under the Single Year Tariff Regime (SYT), along with quarterly adjustments of Power Purchase Price (PPP) for the first two quarters of FY 2017-18. Subsequently, the Authority through its decisions in the matter of periodic adjustments allowed the impact of over/under recovery of allowed Distribution Margin (D.M) and variation in PPP for the remaining two quarters of the FY 2017-18 as Prior Year Adjustments (PYA).
CPPA-G, pursuant to the Authority's decision in the matter of quarterly adjustment of Discos for the 1st & 2nd quarters of FY 2018-19, submitted its Power Purchase Price (PPP) forecast report for setting up of PPP references for the FY 2019-20. The Authority decided to deliberate the issue of revision in PPP references based on the report submitted by CPPA-G, during the instant proceedings of Discos quarterly adjustments for the 3rd & 4th quarters of FY 2018-19. However, CPPA -G, on September 23, 2019, submitted that major assumptions/parameters used in its aforementioned PPP forecast report are required to be updated, therefore, an independent hearing be provided for determination of supplier tariff of Discos based on revised power purchase price reference and approval of concept paper already submitted by CPPA-G regarding modification in tariff determination methodology.
The Authority, in order to provide an opportunity of hearing to all the concerned and meet the ends of natural justice, decided to conduct a hearing on the issue. The hearing was held on September 25, 2019. An advertisement in this regard was published in newspapers on September 14, 2019 and separate notices were also sent to the stakeholders for inviting comments from the interested/ affected parties. Salient features and details of the proposed adjustments were uploaded on NEPRA's Website for information of all concerned.
CEO CPPA-G, during the hearing, reiterated its submissions to consider the revision in PPP references, based on updated report, in a separate proceedings and may not be included in the instant proceedings of Quarterly Adjustments and revision of Distribution Margins. The same was also seconded by the representative of the MoE during the hearing.
The Authority observed that as per the PPP forecast report submitted by CPPA-G, Capacity payments for the FY 2019-20 have been projected in excess Rs 900 billion, with annual generation of around 135,944 GWhs, as compared to the capacity cost of around Rs 650 billion, currently built in the notified tariff. Further, the increased PKR vs US$ parity, upward revision of local gas prices and change in generation mix vis-a-vis numbers projected in the notified tariff are resulting in relatively higher positive monthly FCAs and capacity adjustments. Therefore, it seems appropriate to revise the PPP references built in the notified tariff in order to capture the foreseeable impact of increased capacity payments for the FY 2019-20 and high fuel costs / revised generation mix etc. in order to minimize the impact of quarterly adjustments and monthly FCAs. The Authority is also cognizant of the fact that in the past, the Authority had been projecting the PPP references at its own without any report
The Authority is convinced that existing PPP references require updation, however, as pointed out by CPPA-G, the report needs to be updated. It is important to highlight that the report was uploaded on NEPRA website for comments and consumption of stakeholders. The Authority considers that the required updation in the submitted report would be done by the Authority itself and does not require any independent proceedings as requested by CPPA-G. However, as far as this interim decision is concerned, the Authority has decided to provisionally continue the existing PPP references in this interim decision. The Authority will issue a new Schedule of Tariff (SoT), in its final decision with revised base tariff which would include updated PPP references. The final decision of the Authority in the matter of proceedings under consideration would be a detailed one, with all the justifications and rational of the Authority's assessments thereof. As regards the approval of concept paper is concerned, the Authority considers that concept paper is not exhaustive and does not fully cover the amended Act. The Authority has decided to start the process of issuance of revised guidelines and draft thereof would he placed on the NEPRA website for stakeholders' comments. During hearing, CEO CPPA-G submitted that inflationary impact on O&M cost of XWDISCOs has been requested in line with the mechanism provided in the MYT determination of IESCO, FESCO & USG°. The Authority, however, has observed that the amounts of Depreciation, RoRB and Other income, requested by the MoE for the FY 2018-19, have also been revised from the notified amounts, for which no details/justification has been provided by the Ministry either during the hearing or afterwards. The Authority also noted that indexation of Distribution Margin of IESCO, LESCO & FESCO for the FY 2018-19 has already been allowed by the Authority, in their notified tariff determinations, therefore, request of the MoE to allow indexation/ adjustment of Distribution Margin to the extent of these three DISCOs for the FY 2018-19 is not understandable. The base numbers, however, used by the Moll for projecting increase in Distribution margins of IESCO, FESCO & LESCO are the same as allowed by the Authority for the FY 2018-19, therefore, the projected increases requested by the MoI1 for ESCO, EL KO & LBW perhaps pertains to the FY 2019-20 instead of FY 2018-19.
The Authority further observed that for XW DISCOs under Single Year Tariff regime (SY'I'), the Authority re-assesses their distribution margin every year afresh, based on their Audited Financial Statements/verifiable documentary evidence etc. Similarly, for XW DISCOs under MYT ie, IESCO, FESCO & EESCO, the adjustments prescribed in their tariff determinations are to be allowed based on Audited Financial Statements & verifiable documentary evidences. The Authority, however, keeping in view submissions of Ministry of Energy, the fact that the distribution companies under single year tariff regime may require some time to file their tariff petitions in line with the amended Act and at the same time being cognizant of the financial constraints of the Power Sector has decided to allow an increase of Rs 14 billion, in the already notified tariff, strictly on provisional/interim basis subject to its adjustment once the tariff determinations of the XW DISCOs under Single Year Tariff Regime is finalized by the Authority. Accordingly, the XW DISCOs ie, MEPCO, PFSCO, Hesco GEPCO, SEPCO, TESCO and QESCO are directed to file their tariff petitions as per the amended Act within a period of one month from the date of instant decision.
Similarly, IESCO, FESCO and LESCO, under MYT regime, although, have filed their adjustment, requests with evidences eg, details of write offs, audited financial statements etc. Nevertheless, keeping in view the financial constraints of the power sector, and the submission of Ministry of Energy, the Authority has decided to allow the increase of Rs 5.772 billion in the already notified tariff of these distribution companies, strictly on interim/provisional basis, subject to its adjustment based on the required information, which is not available at this point in time, however, the same have not been substantiated with the required documentary.
It is pertinent to mention that the Uniform Tariff determined by the Authority includes impact of PYA of Rs 226 billion, to be applicable till December 31, 2019. The Federal Government while notifying the allowed uniform tariff shall not adjust the same upwards for any consumer category.