Electricity cost per unit has now gone down for three straight months, in comparison to last year. Try telling that to any household consumer. Rest assured, the ensuing communication won’t make it to any national publication. The fact is somewhere in between. That is because the Pakistan Bureau of Statistics (PBS) uses a saner approach to calculate electricity price change.
But the September 2019 CPI shows electricity prices having dipped 1.2 percent year-on-year and 1 percent month-on-month. Bear in mind that the freshly adopted methodology takes into account the weights of different consumption categories. While, the electricity prices did go up considerably on January 1, 2019 – it was for users above 300 unit category – which has a total share of 11.5 percent, as per PBS methodology.
Later on, the electricity tariffs underwent further increase in July 2019, on account of periodic adjustments for first and second quarters of FY19. But the government decided to pass on only Rs0.75 per unit to domestic consumers, while others were subject to Rs1.8 per unit for the next 15 months. Even in this case, the increase of Rs0.75 per unit was applicable to only those using over 300 units.
For simplicity sake, assume there was no variable of monthly fuel price adjustments (FPA), the year-on-year change in electricity price post January 2019, including the impact of periodic adjustment, is only 1.8 percent. So firstly, the actual increase in domestic electricity price combined across consumption categories is not more than 2 percent year-on-year, and nearly 88 percent domestic consumers have faced no change over previous year.
Herein comes the monthly FPA, and here is where it all gets muddy. There has been some inexplicable delay in FPA decisions – and the last FPA was made for May 2019, which was reflected in July 2019 electricity bills. Ever since, Nepra has had three hearings, but no decisions has yet been made in this regard.
The requested FPA for July and August run at very high rates of Rs1.93 and Rs1.87 per unit, and whenever that gets applied, it will have a telling impact on the final tariff. Bear in mind the FPA is applied across the board, with those using up to 50 units, as the only exception. Had the FPA been timely announced, the September electricity change as per the PBS, would have read 16.6 percent.
What is weird is that the August CPI showed no month-on-month change in electricity prices. This does not add up, as the new methodology accounts for the FPA, and even though there was no notified FPA to be considered for August 2019, the price should have actually dropped month-on-month, as July 2019 numbers did include the impact of FPA.
Similarly, the September electricity price change month-on-month is shown as -0.99 percent. In absence of any FPA, the price should never have changed for September. And even if one assumes for argument’s sake that the FPA was considered for this purpose, the price should have actually increased considerably, instead of going down, as the proposed FPA is close to Rs2 per unit.
Regardless of the shortcoming, the PBS numbers will eventually reflect the impact of FPA on electricity tariffs – and the electricity component of the CPI is expected to increase in double digits for a few months to come.
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