ISLAMABAD: The National Electric Power Regulatory Authority (NEPRA) has approved surcharge of Rs 1.52 per unit on KE consumers to recover Rs 24.5 billion in 12 months (from December 2023 to November 2024) on a motion for Leave of Federal Government filed by the Power Division.
The proceedings on the Motion for Leave continued till last month starting from August 2023 as the power regulator had sought clarifications from the Power Division on the term “financial obligations” which has been made for imposition of surcharge.
The consumers present during the hearing, Abu Bakar Ismail, Arif Bilwani, Moin Fudda, and Imran Shahid opposed the motion filed by the Federal Government. Tanvir Barry, requested the Authority to reject the Motion by submitting that consumers are already paying surcharges for the recovery of PHPL costs, which are not due to any inefficiencies of K-Electric.
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However, Member Sindh Rafique Ahmad Shaikh, in his additional note stated that the motion before the Authority is to approve a levy of surcharge of Rs1.52/kWh on KE consumers in order to fulfill the financial commitments of the Federal Government towards payments to Independent Power Producers (IPPs) and Power Holding Limited.
While the authority to impose surcharges lies with the Federal Government and is not a component of the electricity tariff regulated by NEPRA, the collection of these surcharges from consumers through their monthly bills not only burdens them but also has direct ramifications on the power sector and, consequently, the economic activities of the country, he added.
Rafique Shaikh maintained that it is essential to scrutinize whether collecting revenue through surcharges, especially for expenses with questionable prudence, can genuinely alleviate the sector and the nation’s economic conditions, or if it might further strain the country.
Hence, finding sustainable solutions for the efficient development of the power sector and the economic progress of the nation is imperative.
Currently, the KE draws approximately 1100 MW from the National Grid. The payment for the energy supplied from the Grid is offset against KE’s outstanding subsidy claims from the Federal Government. As of 30 June, 2023, the KE holds an unpaid subsidy claim of over Rs200 billion from the Government of Pakistan which is primarily due to the fact that KE’s established tariff is higher compared to the applicable tariff, resulting in substantial annual subsidies.
The principal cause of KE’s higher tariff is its generation mix, which predominantly relies on thermal sources, with only a meager 1% contribution from Renewable Energy (RE). NEPRA has consistently been directing KE to augment the share of renewable energy in its generation portfolio to improve the Energy Purchase Price (EPP) and, consequently, the overall tariff.
After repeated verbal and written directives from NEPRA, KE submitted Requests for Proposals (RFPs) for NEPRA’s consideration and approval as far back as April 2021, and then filed review motion against NEPRA’s decision in November 2022 aimed at integrating indigenous and cost-effective RE power plants and replacing the existing higher-cost generation, which sometimes reaches up to Rs. 45/kWh (as seen with BQPS-1 in May 2023).
These RFPs have remained pending with NEPRA for over two years. This delay in the finalization of RFPs translates into an increased tariff for KE and, in line with the uniform tariff policy, leads to higher tariff differential subsidies (TDS), eventually contributing to the accumulation of payables for IPPs and Power Holding Ltd.
He further contended that timely decisions on these RFPs would have resulted in a reduction of the GoP’s TDS, as well as a decrease in KE’s overall revenue requirement. Consequently, this would limit the requirement of the Federal Government to impose surcharges.
Copyright Business Recorder, 2023
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