Having made the highest-ever quarterly tariff adjustment for 1QFY24 – Nepra is all set to entertain discos’ relatively modest petitions for 1QFY24 adjustments. It helps that the adjustment is coming off the back of significant upward adjustment in base tariffs – which almost always means much reduced requirement of any significant adjustments in the very first quarter following the annual rebasing exercise. It also helps that exchange rate movements have stayed much in line with what was incorporated into the base tariffs.
The discos have collectively asked for Rs23 billion to be adjusted in lieu of 1QFY24 – most of which pertains to overruns in capacity cost component. For context, a colossal Rs135 billion was adjusted in lieu of 4QFY23 – the effects of which will continue to be felt for six months – as the decision was made to collect the adjustments over a longer timeframe to reduce the inflationary impact. The 1QFY24 adjustment, which is on the lower side, allows the authority to incorporate the adjustment in the ongoing scheme, without having to significantly alter the consumer end tariff. The impact would be under Re1/unit and could well be priced in the QTA already in effect.
The most heartening aspect in the discos’ QTA petitions is the trajectory of transmission and distribution losses. Seven of the ten discos have provided the T&D losses details – and the overall losses have been confined to 11 percent. Granted, that the actual losses will be much higher, as the one who have not reported are on the higher end of losses, especially QESCO and HESCO.
That said, significant drop in T&D losses is visible in the likes of PESCO and SEPCO – traditionally reporting significantly high losses. Peshawar’s losses inside 20 percent are a massive improvement from 38 percent reported in FY22. The same for SECPO have more than halved to 17 percent from being consistently well over 35 percent for a long time. The biggest contributor to loss in terms of absolute amount, MEPCO has also seen the T&D losses go down to 12 percent – a drop pf 3 percentage points.
Recall that the ministry has an active anti-theft campaign going on, and the initial results are heartening. Some of the impact will obviously be down to the campaign – but it only started on September 7, which suggests discos have done really well to curtail losses. The ministry’s efforts in less than two months have yielded savings of over Rs45 billion, at the rate of almost a billion rupees a day, on account of reduction in theft and improvement in billing recovery.
It is still early days, but the ministry must be lauded for showing results on something that has long been a major stumbling block towards gaining efficiency. It is no secret that under recovery and high losses have long crippled the sector’s financial health – and the amount runs up to Rs300 billion. Interprovincial coordination has been tipped as the key enabler for early success. That must continue unhinged, regardless of what happens post 2024 elections. It is clear as daylight that political patronage kept the entire power sector hostage for decades. The ongoing efforts must continue and improved on – for the sector to break free of the shackles.