Another Rs52 billion has been sought by the power distribution companies on account of the quarterly tariff adjustments for 3QFY24. The periodic adjustment comes at the back of Rs85 billion adjustments okayed by the regulator and in effect for the ongoing quarter, in lieu of 2QFY24. The adjustment sough for 3QFY24 pertains to actual consumption during January to March – which stayed at 17.6 billion units – nearly 10 percent lower than the reference consumption for the quarter. The same projected consumption was assumed in levying 4QFY23 periodic adjustment.
For 3QFY24, the under-recovery in capacity component of the tariff shoots up to Rs31 billion, while the rest constitutes of FCA still to be charged, variable operations and maintenance under recovery, and shortfall in use of service charges. This adjustment will likely come into effect for July-September FY25 quarter, and the per unit impact could be close to Rs1.5/unit, considering first quarter is the peak demand period.
The adjustment would be lower than the one currently in place at Rs2.74/unit – but this may not necessarily mean another quarter of tariff respite, as base tariff revisions are highly likely to be in effect from July 1, 2024, and the likely impact would be higher than the differential in the current and proposed quarterly adjustment.
Back to the adjustment. Why does it keep coming back quarter after quarter, especially when fuel charges variance is taken care of separately under the monthly mechanism of FCA? The simpler answer is lower sales than planned and referenced for the respective periods. There is of course an organic element in demand destruction, a large part of which owes to substantially increased consumer end price from yesteryears.
That said, net electricity sales should not be confused for overall demand. That is because distribution companies, in blatant violation of standard rules and procedures, continue to shed load on commercial basis. And they happily pay fines for the violation too. Mind you, the rules of the game do not allow for discriminatory feeder based load shedding purely on the basis of commercial losses. But most discos do that nonetheless – which in turn reduces the number of units for sale – that effectively means higher consumer end tariff.
The capacity component is nearly twice that of the energy component of the total revenue requirement of the system. This in simple terms means, that one more unit taken away from load shedding will always result in lower per unit price for consumer. There is a large number of honest paying consumers who continue to face discriminatory load shedding just because the discos are ill-equipped to tighten the noose and have better remedies available. The eventual T&D loss is not reflective of ground reality – as they are not fulfilling demand, which the generation and transmission systems today can easily cater for.
There is also an element of pendency in new electricity connections. As many as 170,000 connections were pending by the end of the previous quarter, to the tune of 1,100 MW. Yes, discos are hampered with a number of issues of which uniform national tariff is the biggest. That said, there is nothing that justifies depriving consumers of electricity when it is there and of lower tariffs.
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