The National Electric Power Regulatory Authority (Nepra) has allowed the Water and Power Development Authority (Wapda) to increase hydroelectric tariff by 36.65 paisa per unit for 2007-08. Wapda's current hydroelectric tariff is 260.22 paisa per unit, which includes 231.59 paisa fixed charges and 28.63 paisa variable charges.
The utility had proposed 320.27 paisa per unit (35.22 paisa variable charges and 285.05 fixed charges) but the regulator allowed 296.83 paisa per unit (30.97 variable charges and 265.96 paisa fixed charges). The revised tariff is based on net electric output of 28.550 GWh and installed capacity of 6,444 mw.
All Pakistan Textile Mills Association (Aptma), Federation of Pakistan Chambers of Commerce and Industry (FPCCI) and Karachi Chamber of Commerce and Industry (KCCI) had opposed any increase in hydel tariff, but Nepra did not consider their arguments.
Wapda in its petition had submitted that the current tariff was determined for 2005-06 without any provision of indexation. Therefore, indexation should be provided, while another contention was revision in salaries, which resulted in higher O&M costs.
The utility also said that asset base had significantly increased since last determination, and sought adjustment in capacity charges due to decommissioning of Jabban hydel station. It also sought increase in the rate on return due to higher prevalent market rates.
The utility further said that its fixed assets base was expected to reach Rs 162 billion by 2007-08 due to high infrastructure investments as compared to previously asset base of Rs 120 billion.
Return on assets had been proposed as 12.47 percent consisting of 12.31 percent cost of debt and 12.56 percent cost of equity and a debt equity ratio of 34:66. Previously, determined return on assets was 10.7 percent. Net hydel profit (NHP) of Rs 6 billion annually, to be paid to NWFP pending and water usage charges of Rs 0.15 per unit to AJK has been assumed.
The utility had submitted that the issue of NHP payments to NWFP was in the Supreme Court of Pakistan and, based on the final determination of the court, it would file a revised tariff petition.
The petitioner had also requested for tariff indexation mechanism to cater for the changing need of the utility, instead of filing a new petition each year. But the regulator turned down the proposal, saying that there was no justification of providing an indexation mechanism.
"A re-assessment of the revenue requirement of Wapda hydroelectric on the basis of review of annual accounts would be required in the interest on equity in protection of the interest of the consumer as well as the petitioner," the regulator observed.
The regulator has assessed O&M cost as Rs 3.119 billion, NHP/WUC, Rs 6.720 billion, depreciation Rs 5.309 billion, dividend/other income Rs 2.191 billion and Rate on Assets (RoA) Rs 16.424 billion. Thus, Wapda's total hydroelectric revenue requirement has been estimated at Rs 29.381 billion for 2007.
Nepra in its previous tariff determinations for Wapda hydroelectric had allowed recovery of revenue through a two-part tariff comprising Capacity Purchase Price (CPP) and Energy Purchase Price (EPP).
The Authority had split the sale rate in a manner so as the risk of lower production would be shared between consumers, service providers and recipients of hydel profit in such a way that 70 percent of the sale rate would be recovered through fixed and 30 percent from variable charges. The same mechanism is being practised.
Therefore, 30 percent revenue requirements (Rs 8.879 million) should be recovered through EPP and 70 percent of revenue requirement (Rs 20.718 million) should be recovered through CPP. Nepra has further directed that 'Wapda hydroelectric' should maintain separate accounts for its operations in future, instead of amalgamating these with 'Wapda residual power wing'.