Power tariff increased by Rs 2.83 in FCA for May

Islamabad:

The price of electricity supplied through ex-Wapda distribution companies (XWDISCOs) has been increased by Rs 2.83 per unit as part of fuel cost adjustment (FCA) charges for the month of March, according to a notification issued by the National Electricity Regulatory Authority (Nepra) on Wednesday.

The power regulator added that the additional charges will be recovered from consumers in their electricity bills for May.

The notification said that the additional charges will be applicable to all categories of consumers, except Electric Vehicle Charging Stations (EVCs) and electric vehicle charging stations.

Even K-Electric customers will be exempted from this price hike.

This increase will burden consumers with an additional Rs 26 billion.

Last month, the government had sought permission from Nepra to extract about Rs 23 billion more in FCA from consumers for electricity consumed in March, despite 79% of power generation coming from cheaper local fuels.

The Central Power Purchase Authority (CPPA) — a subsidiary of the Power Department — had asked for Rs 2.94 per unit additional fuel cost to recover from consumers till the May bills.

The proposed FCA surcharge was nearly 46% higher than the pre-specified fuel cost of Rs 6.44 per unit, while the cost of power delivered to DISCOs was Rs 9.3819 per unit. Thus, it has asked for an increase of Rs 2.9402 per unit over the reference charges on behalf of the FCA for the month of March 2024. The increase also includes the earlier adjustments of Rs 7.615 billion or Re 0.9492 per unit.

NEPRA reported that there was a negative 7.5% increase in production in March compared to the production assumed in the reference tariff.

This has raised questions about the power sector bureaucracy’s ability to forecast fuel costs even six to seven months out. In recent months, FCA surcharges have ranged between 50 and 115% higher than the pre-set fuel costs announced at the start of the current financial year.

This FCA was on top of an increase of around 26% in the annual base tariff and another 10% increase under the quarterly tariff adjustment currently in effect which is charged to consumers at Rs 2.75 per unit. As a result, consumers continue to pay excessive bills despite lower consumption standards. Nepra had accepted the request for public hearing on April 26.

The higher proposed FCA for March is apparently mainly due to higher domestic coal and natural gas prices, although the use of imported fuels such as coal, diesel and furnace oil remained nil. LNG was relatively cheaper and the exchange rate remained stable.

In a petition, the CPPA, acting as the commercial agent of the Discos, demanded an additional FCA of Rs 2.94 per unit on the May bills for electricity consumed in March. It claimed that the benchmark fuel cost for March was Rs 6.44 per unit, but the actual fuel cost rose to Rs 9.38 per unit. The average fuel cost in February was also around Rs 9.42 per unit. He said about 8,023 gigawatt-hours (GWh) of electricity was generated at an estimated fuel expenditure of Rs 66.7 billion (Rs 8.3 per unit) in March, of which 7,756 GWh of power was delivered to Discos at a cost of Rs 72.67 billion. Rs (at Rs9.38 per unit).

In a related development, K-Electric has submitted an application to Nepra seeking an increase of Rs 18.86 per unit based on FCA charges for seven months – from July 2023 to March 2024.

In its application, the port city’s sole power supplier has sought a reduction in its tariff for two months by Rs 0.29 per unit as FCA charges on them are reflected negatively.

Nepra will hold a hearing on K-Electric’s application on Thursday.