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As the power regulator (Nepra) okayed Rs3.33/unit in lieu of monthly Fuel Charges Adjustment (FCA) for April 2024 – the positive monthly adjustment stretched to 14 straight months– with the year-to-date FCA averaging Rs3.4/unit or 15 percent of base tariff. The longest stretch of relentless monthly fuel charges adjustments comes despite the PKR remarkably holding the turf against the greenback and a considerable respite in international energy commodity prices.

The average reference fuel price for 10MFY24 at Rs6.25/unit is 27 percent lower than Rs8.55/unit for the same period last year. The actual fuel charges per unit for 10MFY24 at Rs9.93/unit are 58 percent higher than reference charges for the period – largely because the actual generation deviated significantly from the reference generation fuel mix, for numerous reasons. Commodity prices for once have not been the reason for such a sizeable deviation from reference fuel cost.

For the umpteenth time, generation from local coal and hydel sources remained lower than the generation assumed in the reference tariff. The generation on RLNG, on the other hand, has stayed higher than envisaged in the reference tariff, multiple times largely owing to contractual obligations. It is no secret that the government-to-government RLNG contracts mean RLNG has to be consumed by power plants, to avoid line packing and due to contractual commitments. RLNG-based generation at 19 billion units (18 percent share) is already over 4 times the reference generation – and the largest contributor to FCA positive adjustment in the last 10 months.

The Details of the base tariff revision for FY25 are still awaited in terms of generation fuel type, which is the most critical component of FCA. The new headache going into FY25 is the hydel sources, as the Neelum Jhelum power project has once again run into trouble, and reportedly, this time it could take a year or more to have any contribution to the grid. Tarbela Extension 4 has not been contributing a great deal either for the past year or so – and together that wipes off close to 2500 MW of dependable generation capacity from the cheapest generation source.

This is where getting the reference generation closer to reality becomes more important than ever before. The ground reality of Pakistan’s contractual obligations on RLNG must be kept in mind, in addition to hydel constraints, and imported coal projects. Doing it right may still lead to a higher base tariff revision than what is planned but would limit the frequent positive adjustments on account of FCA, which is unfair to the consumers, given the lag with which it gets implemented on previous consumption. Here, we hope the authorities learn their lessons from FY24.

Comments

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KU Jun 10, 2024 06:29pm
Fools for flowers, n it's spring time in our power corridors who celebrate unfeasible business n agriculture sectors. More damage ahead is certain in their corrupt hands.
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