2015-16 period: Nepra set to make surcharges, subsidies part of Discos'' tariffs

The National Electric Power Regulatory Authority (Nepra) is set to make three surcharges amounting to Rs 2.07 per unit as well as subsidies part of Discos'' tariffs of 2015-16 as per the federal government''s proposal to shift tariff increase responsibility on the regulator.
On March 7, 2018, Power Division''s Section Officer, Syed Mateen Ahmed, sent a letter to the Registrar Nepra titled "intimation of subsidy/surcharges for inclusion in schedule of tariff for Discos;" Nepra issued a notice of public hearing for March 13. According to official documents, Nepra''s determined tariff is Rs 11.84 per unit whereas current tariff without surcharge is Rs 12.25 per unit which implies that the government is already overcharging consumers by 41 paisa per unit.
Documents further reveal that minimum determined tariff (MDT) is Rs 9.92 per unit (Iesco). Subsidy required on MDT is Rs 1.92 per unit whereas surcharge to maintain NTD except for domestic consumers using less than 300 units and agriculture is Rs 1.57 per unit. Tariff adjustment of 76 paisa per unit will be required to bring it to the level of October 2013. The amount of net subsidy will be 41 paisa per unit.
Nepra has been informed that in accordance with the National Power Policy 2013, ECC of the Cabinet in its meeting on August 17, 2007 had recommended the imposition of a surcharge @ 0.10 paisa per kWh on all electricity consumers, except lifeline consumers for funding of the Neelum Jhelum Hydropower project, a decision endorsed by the Cabinet on December 12, 2007. Accordingly, this surcharge was levied from 2008 till December 2015, and extended till June 2018.
In order to: (a) protect low end consumers from price escalation, tariff rationalization and for maintaining uniform tariff rates in respect of each category of consumers across the country and regions, (b) raise funds for the construction and development of Neelum Jhelum hydropower project; and (c) to meet the repayment obligations of mark-up cost on loans obtained against sovereign guarantees of the Government of Pakistan for reducing shortfall in recovering the full cost of electricity and payment of determined and verified costs of power generation to various power producers, the federal government must notify surcharges under section 31(5) of the Regulation, Transmission and Distribution of Electric Power Act, 1997.
According to the Power Division, Tariff Rationalization Surcharge (TRS) of Rs 1.52 per unit shall be deposited by Discos in a fund called the "Tariff Rationalization Fund" to be kept in an Escrow Account of the Central Power Purchasing Agency Guarantee Limited (CPPA-G) for exclusive use for discharging the liabilities of power producers;
Neelum Jhelum Surcharge is @ 10 paisa per kWh on all electricity consumers of Discos except lifeline domestic consumers of the category ''Residential A-1'' till June 2018. The collection of Neelum Jhelum surcharge shall be deposited by the Discos in a fund called the "Neelum Jhelum Hydro Project Development Fund" to be kept in the Escrow Account of the Neelum Jhelum Company for exclusive use for the Neelum-Jhelum Hydro Power Project.
Debt Servicing Surcharge (DSS) to be imposed at the rate of Rs 0.43/kWh on account of recovering debt servicing applicable to all the consumer categories on per unit consumption of Discos except lifeline domestic consumers of the category ''Residential A-1," namely, "Debt Servicing Surcharge." The collection of the Debt Servicing Surcharge would be deposited by Discos in a fund called the "Debt Service Fund" to be kept in the escrow account of the Central Power Purchasing Agency Guarantee Limited for exclusive use for discharging the liabilities of the power producers.
The sources said, Power Division will ensure that all the power sector loans obtained from banks by the PHPL against GoP guarantee may be serviced through imposition of surcharge including those for which debt servicing liabilities are being paid by the MoF, ie, STFFs of Rs 7.487 billion, Rs 25 billion and Rs 30 billion.
The sources said tariff determined by Nepra for Discos along with proposed surcharge and subsidy is to be forwarded to Nepra for incorporation of subsidy and surcharge in the schedule of tariff to be notified by the Federal Government under section 31 of the Nepra Act.
The sources said the proposed uniform tariff along with subsidy and surcharge shows that no additional financial burden is being passed on to consumers. The Cabinet was further informed that the summary was circulated to the Finance Division, which has mostly agreed with the proposals of this Division.