ISLAMABAD: National Electric Power Regulatory Authority (NEPRA) on Monday approved an increase of Rs 7.90 per unit in Discos’ tariffs for May 2022 to pass on additional financial burden of Rs 113 billion to consumers under monthly Fuel Charges Adjustment (FCA) mechanism, amid massive fuel-shortage driven load shedding of over 8-12 hours a day across the country. This decision was made in a public hearing, presided over by Chairman NEPRA Tauseef H. Farooqi. NEPRA members Engineer Rafique Ahmad Sheikh and Engineer Maqsood Anwar Khan were also present.
CPPA-G had submitted an application for an increase of Rs 7.96 per unit in the case of FCA.
During the hearing, Chief Financial Officer (CFO), Rehan Akhtar said that fuel prices are exorbitantly high in international market. He said, coal had no global acceptance in presence of clean resources due to which prices of South African coal were less than $100 per ton whereas Indonesian coal was available at 80 or 90 dollars per ton.
However, due to war between Russia and Ukraine and issues between Europe and some Asian countries coal demand has increased massively due to which price of South African coal is between $ 350 and $ 360 per ton on FOB and its destination cost is over $ 500 per ton, which is an unprecedented rise.
RLNG is a cleaner fuel and the richer nations are buying it on spot at higher price. Pakistan was buying LNG at $ 8-9 per MMBTU on long run contracts whereas spot buying was within the bracket of +/- $ 10 per MMBTU. For early July, LNG cargoes are not available whereas price of available cargoes for end July is $ 42 per MMBTU, which is a very difficult decision to take for the government due to precarious financial situation of the country. In addition, it will also not be in the interest of consumers.
“If incidental cost is included in $ 42 per MMBTU of LNG price, the generation cost will be above Rs 50 per unit,” he said, adding that the per unit cost of South African coal has been calculated at Rs 47 per unit.
He maintained that LNG cargoes of long-term contract with Qatar are coming regularly whereas a supplier has defaulted on cargo from Italy, adding that PPL is trying to get a substitution cargo late in July.
With reference to furnace oil, the price of crude oil was Rs 80,000 or Rs 85,000 per ton which is now trading at Rs 200,000 per ton. The price of new arrival of crude furnace oil to be processed in local refineries will be over Rs 200,000 per ton.
“The current fuel crisis at the global level was not foreseen at any forum. Energy crisis is not only in struggling countries like Pakistan and developing countries but also in developed counties,” he said.
Commenting on current energy crisis, Chairman NEPRA, said that Pakistan is facing a situation like “damned if we do, damned if we don’t”.
“We have only two options, i.e., either we should refrain from purchasing expensive fuel or generate expensive electricity,” he added.
Chairman NEPRA recalled that the Authority had approved 12 or 13 renewable energy projects of 600-650 MW some 7 to 8 months ago along with tariff and generation licence and fought at every forum to support such projects but the concerned authorities were focused on the capacity trap, which was the phrase used by CPPA-G. However, electricity at a cost of Rs 6 or Rs 7 was not supported and now the country is purchasing electricity at Rs 25 or Rs 30 per unit.
Chairman NEPRA tried to embarrass CFO, CPPA-G for opposing renewable projects at every forum under the guise of capacity trap.
However, CFO CPPA-G diligently responded to the question, saying that each decision is taken under given circumstances.
Responding to CFO CPPA-G, Chairman NEPRA said: “for God’s sake, we should refrain from imported fuel projects and focus on renewable projects including hydro.” He enquired from CFO CPPA-G if they will side with the regulator in favour of renewable energy/ indigenous fuel-based projects.
Praising former Secretary Water and Power, Younus Dagha, the CFO said, he had taken a thoroughly deliberated decision that Pakistan should not rely only on imported fuel which is not a good policy.
He said Thar Energy, Lucky and Shanghai planned on imported coal were converted to local coal.
To a question, he said, Thar Energy is in production, Lucky is in the testing mode, Thal Nove will come in operation in the first week of July, while Shanghai is 86 per cent complete. With these projects, Thar coal mines 1 and 2 will operate on optimum capacity.
Authority sought details of delay in Thar-coal based projects so that it can be verified if the projects were given extension fairly. After arguments and counter arguments, there was agreement that the government is making all out efforts to get cheap fuel and ensure electricity supply to the consumers at a very challenging time. Wrapping up the hearing the Authority said that as per preliminary examination of the data, the FCA impact is calculated at Rs 7.9040 per unit, after making some adjustments of Rs 796 million proposed by the Monitoring and Enforcement (M&E) Section and with respect to NTDC.
Copyright Business Recorder, 2022