Electricity generation in February 2024 went down 9 percent year-on-year to 6.9 billion units – marking the fifth straight month of year-on-year decrease. Mind you, this comes after a stretch of 13 consecutive months of year-on-year decline only for 1QFY24 to break the sequence. So clearly, there is no base effect in play. If anything, power generation has gone down from a considerably lower base. For context, February of 2018 saw nearly the same number of units generated on the grid as February of 2024.

The fiscal year to date 8MFY24 net generation is down 1 percent from last year at 81.5 billion units. It is down nearly 10 percent from the 8M generation numbers of FY22. The 12-month moving average does not instill much hope either, as it is down 6 percent year-on-year to a 35-month low of 10.4 billion units. Electricity generation on 12-month moving average has now stayed down year-on-year for 14 straight months. And this is not even the worst thing about the whole situation.

Consider this. The fuel cost variance from reference charges in the last five months has averaged Rs5.2/share. A deviation from reference fuel charges this significant is not a normal occurrence. The very purpose, why the concept of monthly fuel charges adjustment was introduced was to keep up with externalities such as excessive movements in international energy commodity prices or exchange rate. But since July 2023 – both the exchange rate and international energy commodity prices have behaved rather well – and quite in line with (in fact even lower in some cases than) the assumptions used for Power Purchase Price (PPP) used to arrive at base price and reference fuel costs for FY24.

It is astonishing that the last four months have seen the sought adjustment higher than the reference fuel charges. Then it must surely be the falling generation that is primarily responsible for such massive deviation from reference charges? But wait. The reference sales for the period under discussion are well in line with the actual generation numbers.

So, what gives? The fuel mix. Not that the generation fuel mix is significantly altered from last year or two years ago. If anything, the fuel mix has only improved for the better in most cases. It is in fact the rather absurd reference fuel mix used as the benchmark for FY24 PPP. As highlighted several times in this space earlier, the authorities envisaged a total annual generation of only 6.6 billion units from RLNG.

To put the absurdity in context, annual RLNG based generation between FY18-FY23 stands at 24.8 billion units, with the lowest in FY18 at 20.7 billion units. The only time annual RLNG based generation stayed lower than the 6.6 billion units referenced for FY24 was in FY17 – when Pakistan was just starting its LNG journey.

Nearly 15 billion units on RLNG have already been produced with four months still to go for the fiscal year. The RLNG fuel cost for 8MFY24 is a colossal Rs355 billion. What was budgeted for the entire FY24 in the PPP? Rs156 billion. This is already Rs200 billion in lieu of adjustments – which will likely swell up to Rs300-350 billion by the end of FY24.

Expect no respite in monthly FCAs for the rest of FY24. One can only hope for the authorities to be more considerate and cognizant of ground realities, while doing the annual rebasing exercise for FY25 in a few months.