Nepra estimates Rs1.6 fall in average tariff

ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) on Wednesday claimed that the average national power tariff would be cheaper by Rs1.6 per unit in the next two months compared to the first quarter of the year ending September due to quarterly adjustments.

Nepra’s case officers told a public hearing presided over by regulator’s Chairman Waseem Mukhtar that Discos had sought an additional quarterly tariff adjustment of about Rs6.4 billion for the July-September quarter that worked out an increase of about 36 paise per unit for three months.

However, the regulator’s workings and later confirmed by Central Power Purchasing Agency (CPPA) — a commercial agent of Discos — showed that the total additional QTA was about Rs1.63bn and that some of the Discos had filed inaccurate claims. Therefore, based on the working of the CPPA and regulator’s technical team, the additional per unit impact would work out at nine paise if applied over three months or 13 paise per unit if charged in two months, given the minimal size of the increase.

The case officers also claimed that since a Rs1.74 per unit additional QTA on account of last quarter (March-July) FY24 currently being charged to consumers across the country would be expiring by the end of the current month, a fresh QTA of even 13 paise per unit when charged in two months would keep the average tariff lower by Rs1.61 paisa per unit.

Some businessmen reported that the government had indicated that a revision in base national tariff would be reviewed in January, resulting in about Rs8-12 per unit because of lower inflationary impact, stable exchange rate and reduced interest rates.

It was reported that the closure of the Neelum-Jhelum power project resulted in the utilisation of expensive alternatives, which is another burden on consumers. Still, its capacity charges were not part of the tariff as long as it was out of the national grid.

The public hearing also discussed how technological advancements could impact Disco operations in the next two to three years, emphasising the importance of future planning to adapt to changing industry trends.

Nepra Member Mathar Niaz Rana stressed the need for a study to project where solar and battery prices will stand in a year to ensure that power companies and policymakers were not found off-guard and instead ensure better planning. “Declining prices could significantly change the dynamics of the energy industry,” he remarked.

Nepra Chairman Waseem Mukhtar suggested exploring whether the study should be conducted by the Lahore University of Management Sciences (Lums) or the Power Division.

Nepra officials highlighted that if electricity consumption had not decreased, consumers could have saved Rs50-60 billion in costs. Member Maqsood Anwar Khan attributed lower consumption to loadshedding, saying, “Discos are resorting to loadshedding to minimise losses, which is reducing electricity usage.”

They observed a 10pc decline in average electricity sales, with Faisalabad Electric Supply Company (Fesco) reporting a 14pc drop. Fesco representatives cited a 50pc reduction in tube well electricity demand as the main reason. Similarly, Multan Electric Power Company (Mepco) experienced a 45pc decline in demand.

Responding to consumer concerns, Nepra Member Rafiq Sheikh argued that privatisation of Discos or concession agreements was the only solution for improving the performance of Discos. “The current structure is unsustainable; these companies cannot operate under such conditions,” he stated.

Mr Sheikh also recommended dividing Discos into smaller units to enhance efficiency but cautioned that governance reforms were critical for meaningful improvement. For example, he said it was impossible for a chief executive of the calibre of Sub-Divisional Engineer to successfully operate or improve Hyderabad Electric Supply Company spread over 76,000 kilometres.

Mr Sheikh dismissed the notion that solar technology alone could significantly curb electricity demand. Instead, he urged addressing broader governance and operational issues within Discos.

It was, however, clear that all the stakeholders, including Nepra, Power Division, the government and the power companies, were only making guesstimates about the reasons for the decline in electricity consumption for many months, and none had the actual data about the installation of solar systems, closure of industry or any other reasons.

Published in Dawn, November 21st, 2024