National Electric Power Regulatory Authority (Nepra) has approved a significant increase in electricity tariffs, effective for the fourth quarter of the fiscal year 2023-24. This adjustment will raise electricity rates by up to Rs1.90 per unit, impacting both state-owned power distribution companies (DISCOs) and private utility K-Electric. The total financial burden on consumers from this adjustment is projected to be Rs46 billion.
This increase is primarily attributed to several factors, including lower electricity demand, reduced utilization of maximum demand indicators (MDI), and aggregate technical and commercial (AT&C) losses-driven load-shedding. Despite these increases, Nepra has announced that consumers will see a net relief of Rs1.80 per unit in their September 2024 electricity bills. This relief is due to a reduction in fuel charges adjustment and a decrease in the quarterly tariff adjustment for the previous quarter.
Breakdown of the Tariff Adjustment
Financial Impact of the Adjustment
The total amount to be recovered from consumers, Rs46.805 billion, is divided into several components as follows:
| Component | Amount (Rs Billion) |
|---|---|
| Capacity Charges | 22.867 |
| Variable Operation and Maintenance (O&M) Costs | 3.566 |
| Use-of-System Charges and Market Operator Fee | 7.513 |
| Transmission and Distribution (T&D) Losses | 11.067 |
| Net Metering | 1.792 |
| Total | 46.805 |
Impact on Different DISCOs
Here’s a detailed look at the financial claims made by various DISCOs for the fourth-quarter tariff adjustment:
| DISCO | Requested Amount (Rs Billion) |
|---|---|
| Islamabad Electric Supply Company (Iesco) | 0.926 |
| Lahore Electric Supply Company (Lesco) | 3.995 |
| Gujranwala Electric Power Company (Gepco) | 7.682 |
| Faisalabad Electric Supply Company (Fesco) | 4.777 |
| Multan Electric Power Company (Mepco) | 7.909 |
| Peshawar Electric Supply Company (Pesco) | 0.674 |
| Hyderabad Electric Supply Company (Hesco) | 5.016 |
| Quetta Electric Supply Company (Qesco) | 8.078 |
| Sukkur Electric Power Company (Sepco) | 4.538 |
| Tribal Areas Electric Supply Company (Tesco) | 3.210 |
Key Issues and Criticisms
Employee Comments and Reactions
Nepra Chairman Waseem Mukhtar addressed the media, emphasizing that despite the increased tariff, consumers would benefit from a net reduction of Rs1.80 per unit in their September 2024 bills due to lower fuel charges and previous quarter adjustments.
Mukhtar also highlighted that the future tariff adjustments are expected to be minimal if the current economic conditions persist. However, he did not provide details on the financial impact of AT&C losses-driven load-shedding or capacity payments made to independent power producers (IPPs) for unused booked capacity.
Criticisms and Suggestions
Nepra members voiced several concerns regarding the operations of DISCOs:
- Member Rafique Ahmad Shaikh criticized DISCOs for limiting net metering facilities. For example, Pesco previously restricted net metering to 30% of transformer load but is now allowing up to 70%. He highlighted that some DISCOs are not utilizing their full allocated capacity, leading to inefficiencies.
- Member Mathar Niaz Rana suggested imposing penalties on DISCOs that underutilize their allocated capacity. He also noted a significant 8% reduction in sales reported by Fesco due to a shift towards solar energy.
- Member Maqsood Anwar Khan called for detailed reports on the allocation and utilization of capacity from the National Power Control Centre. He expressed concerns over DISCOs denying net metering facilities and emphasized that DISCOs should address issues related to transformer load.
Future Outlook and Government Measures
The government has authorized the sale of 51% to 100% of PIA’s stakes, including management control. Six parties are currently conducting due diligence on the airline. The proposed sale terms include options for partial purchase payments and debt-funded investments over three years, along with a potential three to five-year pause on dividend payments to shareholders.
Additional Measures
Nepra has indicated that the impact of quarterly adjustments for K-Electric consumers will be covered by the government through a subsidy. Future tariff adjustments are expected to be minor if the current economic conditions remain stable.
In conclusion, while the new tariff adjustments will place an immediate financial burden on consumers, the government and Nepra are working to balance this with relief measures and ongoing reforms to improve the efficiency and transparency of the power distribution sector.
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