Fuel price adjustment: Discos may not be allowed to collect Rs1.67 a unit

MUSHTAQ GHUMMAN

ISLAMABAD: Power Distribution Companies (Discos) are unlikely to be allowed to collect Rs1.67 per unit for September 2011 as Fuel Price Adjustment (FPA), until a parliamentary panel, as announced by the minister for water and power makes its recommendations, sources told Business Recorder on Wednesday.

On March 27 this year, the ministry of water and power had barred Discos from collecting fuel price adjustment charges of four months (October-January) amounting to billions of rupees till the finalisation of a viable collection mechanism.

The National Electric Power Regulatory Authority (Nepra), on March 20 this year approved a Rs6.39 per unit increase in power tariff of the distribution companies for last four months under monthly fuel price adjustment formula.

This includes Rs2.22 per unit for October 2011, Rs1.27 per unit for November 2011, Rs0.94 per unit for December 2011 and Rs1.96 per unit for January 2012.

Central Power Purchasing Agency (CPPA), during the hearing, argued that in October 2011, a total of 7.774 billion units of electricity were sold by the power distribution companies, in November 6.849 billion units, in December 6.491 billion units and in January 2012, these companies sold 6.01 billion units.

The CPPA stated that the actual cost of producing electricity per unit in October was Rs6.95, in November Rs6.32, in December Rs7.26 and in January Rs9.28 per unit.

One of the members of Nepra, Shaukat Ali Kundi, however, wrote a dissenting note on September’s fuel charge adjustment. He argued that before making any adjustment for September, the reference/benchmarks determined by the authority for the financial year 2011-12@ 6.5484 per unit while assuming the cost of furnace oil at Rs 65,000 per ton, should also be taken into consideration. Therefore, there is no legal justification for an adjustment on the basis of references determined for the previous year (FY 2010-11) which is now non-existent and irrelevant.

The authority determined the tariff on the basis of a majority, instead of a consensus, which raised several questions.

When an official of Nepra was asked to comment on the legal status of tariff determination when one member writes a dissenting note, he said that a dissenting note could not affect the legality of the decision.

Some other interesting aspects of this determination are as follows: (i) Nepra did not allow Discos to pass on Rs1.129 billion burden to consumers in respect of 83.89 GWh of energy supplied during September 2011 by three Rental Power Plants (RPPs) namely Gulf, Karkey and Naudero-I with an impact of Rs0.0779/kWh; (ii) the Authority set aside Rs101.585 million on account of miscellaneous supplemental charges because of lack of evidence; and (iii) disallowed Rs 98,201,558 for 5,485,840  units of energy delivered by Gadoon Textile Mills Limited to Pesco.

The authority also noted that during September 2011, NTDC claimed 3.04 percent transmission losses against the determined losses of 2.5 percent in accordance with the authority’s determination of January 6, 2006. The authority considers that the claimed transmission losses by NTDC are not consistent with its determination, hence, cannot be passed on to the consumers.

The Authority has restricted the NTDC losses to 2.5 per cent in accordance with its determination; accordingly impact of Rs0.0338 per unit on this account is being disallowed to be passed on to the consumers.

On Monday, the Minister for Water and Power, Syed Naveed Qamar, announced that collection of fuel adjustment charges on electricity bills was being deferred and advised consumers not to pay for the time being.