Export-oriented units: Lesco posts Rs1.1bn revenue loss?

LAHORE: The Lahore Electric Supply Company (LESCO) has booked Rs1.1 billion revenue loss from its connections to the export-oriented units due to unaffordable electricity tariff, said sources.

According to sources, the Company lost such a huge amount of revenue in October 2023 against the corresponding period, which is known as vicious cycle of increasing tariffs and declining consumption among the stakeholders. They said the revenue increase from price effect is far outweighed by revenue decrease from volumetric contraction in consumption such that the net impact on power sector revenue is negative.

The grid electricity tariffs are currently approximately 17.5 cents/kWh and expectedly kept increasing with no end in sight. The National Electric Power Regulatory Authority (NEPRA) has imposed Fuel Price Adjustment (FPA) of Rs7/kWh imposed for January 2024 and high Quarterly Tariff Adjustments (QTAs) expected for upcoming quarters given power consumption is on continuous decline.

Meanwhile, the gas price has hiked again to Rs2,750/MMBTU - an increase of 223% since January 2023, pushing cost of captive generation well above regionally competitive levels, which means that there is no financially viable source of energy for firms to manufacture with and be able to compete in international markets.

It may be noted that both the industrial and high-end domestic consumers are major contributors to power sector fixed costs and a decline in consumption means the fixed costs are spread over a smaller pool of consumption - necessitating tariff increase for all consumers through QTAs.

The sources said higher tariffs cause consumption to decline further, necessitating yet more increases in power tariffs and this cycle would eventually lead to the collapse of the power sector and decimate industry along the way.

They have stressed that the system is crippling, which requires from the new government to show resolve of doing away with the woes of power sector. Otherwise, the power sector will get buried beneath its own weight, and, in the process, exact a heavy toll on the national economy, they apprehended.

The sources close to Chief Executive Officer (CEO) LESCO said the NEPRA authorities had asked him whether a decline in the industrial consumption is due to the jerks and interruptions or high tariff, which he responded by blaming the high tariff behind the phenomenon.

Copyright Business Recorder, 2024