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The monthly fuel charges adjustment for K-Electric consumers were determined last week, for 11 months starting from July 2019. On the face of it, the collective monthly FCA amounts to a negative adjustment of Rs2.2 per unit, which is supposed to be collected in three months, to the units charged for the respective applicable actual consumption.

As a recap, five of the 11 months saw negative monthly adjustment, as high as Rs2.13 for November 2019. The collection schedule has been planned as such that clubs negative and positive adjustments to be collected between March 2021 and May 2021. Based on weighted average consumption, the average adjustment comes down to negative Rs0.15 per unit – as some of the negative adjustments have been reported in low consumption winter months.

Be that as it may, the negative adjustments would surely be welcome by the KE consumers, especially in light of the previous adjustment exercise, where the FCA for 36 months starting July 2016 yielded an average upward adjustment of Rs1.32 per unit that was collected in nine months starting January 2020. There is more than what meets the eye, and the actual impact in case of negative monthly adjustment is significantly altered for different consumption slabs – unlike the positive FCA.

The mechanism for monthly FCA is such that it excludes domestic consumers consuming up to 300 units and agriculture consumers. And this is not specific to KE, as Nepra uses the same yardstick for all adjustments across the discos. One could argue why the consumer on the lower end of consumption does not get the benefit of improved fuel mix, but that is a policy decision, to which KE is not answerable.

It is often argued that since the consumers up to 300 units often receive the highest inter-disco tariff differential subsidy, excluding them from monthly negative FCAs is not all that bad. While the precise number of consumers falling within the 0-300 categories for KE is not out in public, using the national average of 78 percent consumption within 0-300 units, the same for KE should also be on the higher side.

A technical question then arises that do the discos, and in this case, KE, end up getting more than the fair share in lieu of fuel adjustments? That is a question that Nepra would do well answering. There is also a small matter of treatment of monthly FCAs by the PBS in its inflation computation. While monthly FCAs are now part of the PBS methodology of calculating electricity tariff, the fact that negative adjustments exclude a vast majority of consumers is not accounted for by the PBS - invariably leads to understating the electricity price for the given period. It is never late to correct an overlooking. Hope the PBS is listening.

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