ISLAMABAD: The Power Division has revealed that domestic and commercial consumers have been hit by Rs 7.64 to Rs. 15.0 per unit of tariff increase in billing of August 2023, well-informed sources told Business Recorder.
Recently, the Cabinet took serious note of the increase in electricity bills and public protests across the country. The PM said the government’s primary aim was to take care of the common man.
He asked the Power Division to explain the reasons for the price hike in electricity bills and to suggest measures that are needed to be taken to address the grievances of the general public on this issue.
Power Division explained to the cabinet that rise in electricity bills was due to many factors including the fact that a major component of electricity produced depended on imported furnace oil, diesel, coal, etc, and as all imports were paid in dollars, therefore, the cost of power generation had risen. And secondly, the cost of power generation was often not fully recovered.
Thirdly, power theft and capacity payments to the IPPs were also adding to the price hike. It was stated that there was excessive use of electricity by domestic consumers rather than the industrial or commercial enterprises, which otherwise would have led to faster growth.
However, a major reason for the huge increase in electricity bills was due to the fact that the annual rebasing of tariff happened in July, so the increase shown in August was actually for two months. In addition, the bill is normally highest in month of August, mainly due to reduced hydel power production.
Power Division further noted that it had been actively engaged in discussions to work out proposals for addressing the ongoing increase in charges in electricity and to provide some relief to the consumers, in particular the vulnerable who were using 400 units or below. It was stated that to bring down the electricity bill, corresponding actions needed to be undertaken, such as allowing payment in 4 or 6 installments and crackdown against electricity theft.
The Power Division further stated that as per applicable financial modelling of the power sector, consumer end tariff is rebased on yearly basis at the start of the financial year. Rebasing of uniform tariff determined by NEPRA for FY 2023-24, and recommended by it as final tariff’ for publication in the official gazette was notified by the Federal Government on July 26, 2023 vide SROs No. 938 to 947 (1)/2023 dated 26th July 2023 & SRO No.977 (1)/2023 dated 27th July, 2023 to be applied with effect from 1st July 2023. This resulted in average increase of Rs. 5.75/unit in the base tariff of the consumers.
As the rebasing was notified in the last week of July 2023, some adjustment of its application, from 1st July 2023, became applicable in the billing month of August 2023.
As a result, domestic and commercial consumers were hit by Rs 7.64 to Rs. 15.0 per unit of tariff increase in the August 2023 billing. Moreover, already applied surcharges, quarterly tariff adjustments, fuel price adjustments and other FBR levied taxes added to the overall increase in the electricity bills for the consumers across the country.
The Power Division further stated that the Caretaker Prime Minister of Pakistan had chaired a meeting on 27th August, 2023 in which he had directed the Power Division to suggest measures for provision of immediate relief to the consumers.
Accordingly, Power Division had prepared a proposal for staggering of financial impact of the FY 2023- 24 rebasing for domestic and commercial consumers. It was added that the proposal had an estimated cash flow impact of Rs 36.2 billion with a markup implication of Rs 4.5 billion.
Power Division suggested recovery of bills from domestic consumers using up to 400 units and commercial consumers in four installments. However, Minister for Power stated that owing to the IMF extension could not be given beyond six months.
According to an estimate it would defer the payment of Rs. 36 billion from 90% domestic and 95 % commercial consumers that would also affect its cash flows. The Power Division also urged recovery of payments from the provinces and requested the support of the prime Minister and the Cabinet.
The Power Division was asked to bring a carefully calibrated Load Management Plan and Energy conservation plan for consideration of the cabinet. Prime Minister agreed that this was important and directed the Power Division to bring the season wise Energy conservation plan.
The Minister for power stated that matter relating to energy should first be deliberated upon in the cabinet committee on Energy and then be brought before the cabinet for a decision. It was also pointed out that the energy sector was a part of Standby Arrangement with IMF and as such prior consultations with the Finance Division would be required before taking any decision on price reduction or provision of relief.
After detailed discussion, the Cabinet decided that that the matter may first be deliberated upon in the CCoE and later be placed before the Cabinet for a decision.
Copyright Business Recorder, 2023