ISLAMABAD: The National Electric Power Regulatory Authority (NEPRA) on Thursday raised questions on the proposed increase of 25 percent in Power Purchase Price (PPP) for 2024-25 as some of the figures presented before the Authority were not substantiated by the CPPA-G officials.
According to the representative growth projections of 3 to 5 per cent in energy consumption are based on GDP growth projection of 3.5 per cent for 2024-25 as per the International Monetary Fund (IMF) as none of the government departments have shared GDP growth projections for next fiscal year.
The CPPA-G in its petition proposed that the matter should also be discussed with stakeholders, and sought approval of Power Purchase Price (PPP) of over Rs 27 per unit for FY 2024-25 and Market Operator Fee (MoF) of Rs 3.48 per unit. It was noted that 70 per cent of total cost is related to Capacity Purchase Price (CPP) whereas 30 per cent is energy cost. It is estimated that with adjustment in PPP, electricity prices will increase by Rs 5 per unit.
The Authority comprising of Nepra Chairman Waseem Mukhtar, Member (Technical) Sindh Rafique Ahmad Shaikh, Member (Tariff and Finance) Mathar Niaz Rana, Member KPK Maqsood Anwar Khan and Member (Law) Amina Ahmed officiated a hearing in this regard.
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During the hearing, the officials of CPPA-G stated that currently 80 MW generation through net metering is being included in the system, adding that 1900 MW has so far been added to the system since 2015. It was also revealed during the hearing that solar panels of 7000 MW have been imported from July 1 to April 30, 2024.
In reply to a question, Chairman NEPRA replied that the issue of net metering is under discussion at different forums. The Federal Government will issue guidelines to NEPRA as the Regulator receives those guidelines at a public hearing which will be organized to hear all stakeholders.
Meanwhile, CPPA-G also sought approval of Power Purchase Price (PPP) of over Rs 27 per unit for FY 2024-25 and Market Operator Fee (MoF) of Rs 3.48 per unit.
The government has formally sought about a 25 per cent increase in the base national electricity tariff to become effective from July 1, 2025, to secure a revenue requirement of about Rs4 trillion in FY25 for power companies.
The CPPA, the Market Operator of power sector, has presented seven different scenarios for electricity to be sold during FY25. Under these estimates, 131,000 to 139,000 gigawatts hours (GwH) of electricity sales are expected next year, with demand growth ranging from 3% to 5%.
The minimum increase under one estimate works out to be Rs4.40 per unit in PPP and goes up to Rs6.50 per unit to Rs27.11 per unit. On average, the CPPA has sought an increase of Rs6.80 per unit in PPP or more than 25% based on the annual revenue requirement of about Rs3.6trillion or an average PPP rate of Rs32.75 per unit when compared to Rs26 per unit (Rs2.87trillion) in the current year.
After additional distribution margins of about Rs385 billion for Discos and about Rs 80 billion of prior-year adjustments, the average sale rate for next year works out to be Rs37 per unit based on Rs4.07trillion against Rs29.78 per unit or Rs3.3trillion for the current year, representing an increase of 25%.
The major increase of almost 50% has been sought on account of energy purchase price (EPP), including variable operations and maintenance cost. The EPP for next fiscal year has been claimed to be Rs1.16trillion to Rs1.26trillion against Rs840.5billion in current year. Therefore, the per unit EPP works out to be Rs11.45 per unit next year against Rs7.63 during current year, showing an increase of Rs3.8 per unit.
CPPA-G also presented seven scenarios of exchange rate from Rs 270/$ to Rs 300/$. The Chairman NEPRA was of the view that the Authority has to think about exchange rate more carefully. He further stated LIBOR is being replaced with SOFR which will also affect tariff as pacts with IPPs will be altered.
Member Finance NEPRA, Mathar Niaz Rana said that the projection of GDP should be based on ground realities as electricity demand has lowered in industrial sector whereas growth in big industry has increased which implies that industry has also shifted towards solarization.
Member KP, Maqsood Anwar Khan argued that due to expensive electricity, its demand has reduced. He was of the view that if Discos sell their electricity to those areas where revenue based load shedding is ongoing, the government can recover energy cost from consumers.
Wajid Chattha of National Power Control Centre (NPPC) noted that presently installed capacity is about 39,000 MW whereas dependable capacity is 36,000 MW. However, the system can transmit only 26,000 MW.
It was pointed during the hearing that the PPP determination’s proposal is not aligned with Indicative Generation Capacity Expansion Plan (IGCEP).
The representatives of Karachi Chamber of Commerce and Industry (KCCI) and Korangi Association opposed any increase in existing electricity tariff, saying in case of increase in tariff, the industry which is already in hot waters will completely shut down.
The CPPA-G officials, however, argued that they proposed adjustment in PPP so that impact of variation in FCAs and QTAs should be minimal.
The CPPA-G further informed that three new projects, ie, 870 MW Suki Kinari power project, 100 MW Zorlu Solar power project and 32 MW Shahtaj Sugar Mills will also be commissioned during the next fiscal year.
Copyright Business Recorder, 2024
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