Power rates to rise despite lower fuel costs
ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) announced on Wednesday that electricity rates for consumers of ex-Wapda distribution companies (Discos) will be higher next month despite lower fuel costs.
During a public hearing on fuel cost adjustments (FCA) for September’s electricity consumption, a Nepra case officer said that “there would be a net increase of 15 paise per unit for consumers”, provided the regulator approved 71 paise per unit in refund demanded by Discos in November.
He explained that an 86 paise per unit negative FCA was applicable in October bills that would come to an end and be replaced by a 71 paise negative adjustment, thus a net increase of 15 paise per unit.
During the hearing, presided over by Nepra Chairman Waseem Mukhtar, the regulator’s technical member Rafique Sheikh inquired about the impact of lower FCAs and changes in consumption patterns on quarterly tariff adjustments (QTA) due next month. The case officer reported that quarterly adjustments were estimated to have increased tariff by Rs40-45bn, but clearance of some outstanding cases like nuclear power would almost nullify any increase.
Consumers to face 15-paisa hike per unit in November, provided Nepra okays 71-paisa refund
The hearing was told that most of the factors assumed to allow higher reference tariffs were generally in line with estimates.
The electricity generation in September was reported to have fallen by 9.9pc against estimates of reference tariff, 6.4pc down year-on-year and 5.2pc less than in August. The first quarter (July-September) of this fiscal year also saw an 8pc reduction in generation compared to the same period a year ago.
The Central Power Purchasing Agency (CPPA) claimed more than Rs7.5bn in dues to sugar mills. However, some participants challenged the claim, saying the government was claiming to have reached an understanding with bagasse-based plants.
Therefore, these claims were unjustified. The Nepra chairman explained that such an agreement was not officially on paper and could only be considered upon the government’s formal request for tariff re-determination.
Mr Mukhtar also insisted that the closure of the Neelum-Jhelum Hydropower Project due to a tunnel collapse had no impact on consumers because it was on a ‘take and pay’ contract and the shutdown meant no payments.
However, he was reminded by commentators that its closure definitely had a negative financial impact on consumers because this led to the utilisation of expensive plants on LNG or coal, and the additional impact of past bagasse calculation based on imported coal also had a detrimental impact. Moreover, the consumers had been paying the Neelum-Jhelum surcharge for almost a decade to finance the project and its closure caused double jeopardy.
The CPPA had claimed that reference fuel cost stood at Rs9.8 per unit, but the actual average fuel cost amounted to Rs9.1 in September compared to Rs7.62 for the same month last year, showing an increase of almost 20pc.
It said that about 12,487 gigawatt-hours (GWh) of electricity was generated at an estimated fuel expenditure of Rs104bn (Rs8.34 per unit) in September, of which 12,118 GWh were delivered to Discos at a cost of Rs110.2bn (at Rs9.09 per unit).
Data showed a major fall in power consumption was apparently due to record tariffs and the shrinking purchasing power of the consumers. The consumption in September 2024 was almost 20pc lower than the same month (12,920Gwh) of last year. The fuel cost in September last year was reported at Rs7.62 per unit against Rs9.09 this year.
Hydropower, which has no fuel cost, accounted for the largest share of power generation at 39pc, slightly higher than last year’s 37.5pc. LNG-based power contributed 16.3pc of the supply, followed by nuclear at 13pc, down from 17pc in September 2023.
Coal-based generation contributed 19.3pc, with local coal making up 10.1pc and imported coal 9.2pc. This was followed by a 7.91pc contribution from local gas.
LNG-based power generation in September cost Rs24.96 per unit, while imported coal cost Rs16.6 per unit and local coal Rs12.29 per unit. Power generated from furnace oil was the most expensive at Rs30.3 per unit, though it made up just 0.3pc of the total supply.
Meanwhile, local gas-based power generation cost Rs13.67 per unit, and nuclear fuel remained the cheapest at Rs1.54 per unit. Renewable energy sources — wind, bagasse and solar — together contributed 4.3pc to the national grid. Wind and solar also have no fuel cost, while bagasse-based generation doubled in cost to Rs12.48 per unit, up from Rs6 per unit previously.
Electricity imports from Iran accounted for 0.3pc of the power supply at around Rs26 per unit.
The FCA, reviewed monthly, only applies to consumers’ bills for one month at a time. If approved, the lower FCA will not apply to domestic consumers using up to 300 units per month.
Under the national tariff mechanism, changes in fuel costs are passed on to consumers on a monthly basis, while quarterly tariff adjustments — accounting for variations in power purchase prices, capacity charges, variable operation and maintenance costs, use of system charges and impact of transmission and distribution losses — are built in the base tariff by the federal government.
Published in Dawn, October 31st, 2024