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ISLAMABAD: The Federal Government has approved a massive increase in tariffs of Distribution Companies (Discos) - by approximately Rs 3.50 per unit, of which Rs 1.5359 per unit raise is for December 2020 under monthly fuel price adjustment mechanism and Rs 1.95 per unit raise in base tariff, days before formal resumption of IMF's suspended programme.

On Wednesday, National Electric Power Regulatory Authority (Nepra) notified an increase of Rs 1.5359 per unit in Discos tariffs for December 2020 whereas formal notification of "approved" uniform increase of Rs 1.95 per unit in base tariffs of Discos will be notified on Thursday (today) or Friday (tomorrow).

The cumulative impact of Rs 3.4859 per unit increase in Disco's tariff will be passed on to consumers in their bills of February 2021. The impact of Rs 1.5359 per unit, having a financial impact of Rs 11.6 billion will be charged across the board except to lifeline consumers. This raise will be replaced with an increase to be determined for January 2021.

The Authority during the course of hearing observed that, prima facie, certain efficient power plants were not fully utilized and instead energy from costlier RFO based power plants was generated to the tune of over Rs.3,609 million during the month of December 2020. The Authority has been directing NPCC/NTDC & CPPA-G repeatedly to provide complete justification in this regard to the satisfaction of the Authority and submit details of deviation from Economic Merit Order (EMO), showing hourly generation along-with the financial impact of deviation from EMO, if any, and the reasons, thereof.

Although, NPCC/NTDC provided details of plants operated on RFO, and a]so presented the same during the hearing, however, an in-house analysis has also been carried out to work out the financial impact due to deviation from EMO based on the information submitted by NPCC. As per the in-house analysis, the net amount deductible from the overall claim due to deviation from EMO due to underutilization of efficient power plants works out as Rs.665 million. The Authority has decided not to allow this amount in the instant FCA until NPCC/ NTDC and CPPA-G provide the required details along-with complete justification in this regard to the satisfaction of the Authority.

Regarding charging of fuel costs pertaining to previous months in the subsequent monthly FCAs, the Authority noted that it is not possible to adjust such costs in the FCA for the month to which it pertains, as the same has already been determined, notified and charged from consumers. Therefore, any such adjustments, either positive or negative, are to be adjusted in the subsequent monthly FCAs, otherwise it would result in piling of huge costs, which is not in the interest of consumers or of the power sector.

However, the impact of Rs 1.95 per unit will continue in the years to come to be applicable on all categories of consumers. Nepra has determined tariff of seven Discos for the year 2018-19 and 2019-20, separately under Single Year Tariff (SYT) regime, annual adjustments and of three Discos for the year 2019-20 under Multi Year (MYT) regime.

The regulator determined revenue of Rs 1.69 trillion for all the Discos of which revenue requirement for Iesco was Rs 158.039 billion, Lesco, 354.230 billion, Fesco, Rs 223.377 billion, Gepco, Rs 162. 386 billion, Mepco Rs 281.156 billion, Pesco, Rs 197.630 billion, Hesco Rs 100.674 billion, Qesco, Rs 102.826 billion, Sepco, Rs 75.584 billion and Tesco, Rs 24.875 billion.

The approved revenue requirement also includes O&M cost, depreciations, RORB and other income. The total impact of depreciation has been calculated at Rs 25 billion for all the Discos.

On the basis of required revenue, NEPRA determined differential tariff for each Disco. According to the determinations, NEPRA had approved average tariff of Iesco at Rs 14.29 per unit, Lesco, Rs 15.99 per unit, Fesco, Rs 16.26 per unit, Gepco Rs 15.69 per unit, Mepco, Rs 16.88 per unit, Fesco, Rs 16.69 per unit, Hesco Rs 22.97 per unit, Qesco, Rs 18.84 per unit, Sepco Rs 21.58 per unit and Tesco, Rs 14.54 per unit. The total determined average tariff was Rs 16.69 per unit.

According to Nepra, it had proposed an increase of Rs 3.34 per unit across the board but the government has decided to pass on Rs 1.95 per unit to consumers whereas the remaining Rs 1.39 per unit will not be passed on to consumers for the time being.

The government will extend an additional subsidy of Rs 185 billion, over and above the budgeted subsidy of Rs 150 billion, to keep the tariff uniform.

Copyright Business Recorder, 2021