MUSHTAQ GHUMMAN

ISLAMABAD: Imposition of three surcharges, higher energy consumption due to a heatwave and Ramazan, as well as the cessation of refund of Fuel Price Adjustment (FPA) in June 2015 are the major reasons behind doubling of electricity bills of consumers.

Well-informed sources told Business Recorder that Power Distribution Companies (Discos) have sent higher bills to consumers primarily because around Rs 3 per unit surcharges were made part of regular tariff. Additionally, the government did not pass on to the consumers the impact of Fuel Price Adjustment (FPA).

Power tariff or revenue requirement is based on two assumptions i.e. 100 percent collection and 12.5 percent loss which is the global standard.

According to sources, collection was 87 percent till April 2015 whereas losses are hovering around 18.2 percent which implies that collection was 13 percent less and losses 5.7 percent higher as compared to what is allowed. One percent loss is equal to Rs 10 billion.

“The cumulative financial impact of less collection and higher losses is around Rs 200 billion. This is called inefficiency. Lower collection and higher losses is not the fault of consumers,” said one of the power sector analysts.

Since Nepra is not allowing more than 12.5 percent loss, Finance Ministry tailored a plan to bridge the financial gap of Rs 200 billion through imposition of a surcharge, the sources continued. Pakistan’s industry is bearing the brunt of massive increase in tariff as well as tariff relief which was given to the industry in 2014-15 but which appears to have been withdrawn. The industry was given a substantial relief due to less cost of service.

Presently, power sector receivables are Rs 628 billion against Rs 275 billion payables, of which Rs 268 billion is owed by federal and provincial governments including K-Electric.

“Government has inbuilt inefficiencies of power sector in the consumers tariff in the name of tariff rationalization surcharges,” the sources maintained.

In June 2013, government had beaten the drums of clearing circular debt of Rs 480 billion. Actually, only Rs 280 billion was paid to the IPPs and PSO while remaining Rs 200 billion was simply a paper transaction.

Official documents reveal that in May 2015, government made three surcharges as regular part of electricity tariff and the cumulative financial impact of the surcharges was calculated at Rs 2.07 per unit. In addition, a significant shortfall in recovery of full cost continues to emerge due to less than full pass-through of the cost of electricity. In order to fulfill financial requirements of Discos, loans from banks have been arranged for payment to power producers to maintain power generation and ensure fiscal stability of the power sector. The mark-up cost of such loans needs to be transferred and recovered from the end consumers. The Ministry has pleaded to: (a) protect the lifeline consumers from any price escalation, rationalise tariffs and maintain uniform tariff rates 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 such loans obtained against the sovereign guarantees of the Government of Pakistan for the purposes of reducing the above-mentioned shortfall and payment of verified costs of power sector, it is required that the Federal Government notify the following surcharges under section 31(5) of the Regulation, Transmission and Distribution of Electric Power Act, 1997 (XL of 1997). 

Tariff rationalisation surcharge on national average basis for electricity consumers of Ex-WAPDA Distribution Companies is Rs 1.54/kwh. The collection of the tariff rationalisation surcharge will be deposited by Discos in a fund called the “Tariff Rationalisation Fund” to be kept in the escrow account of the Central Power Purchasing Agency (CPPA) for exclusive use for discharging the liabilities of the power producers. 

The ECC headed by Finance Minister Ishaq Dar also extended Neelum-Jhelum surcharge of 10 paisa per KWh on all electricity consumers of Ex-WAPDA Distribution Companies except lifeline domestic consumers till December-2016. The collection of Neelum-Jhelum Surcharge will 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. 

The ECC also approved financing cost surcharge @ Rs 0.43/KWh on account of recovering the debt servicing applicable to all consumer categories on per unit consumption of Discos except lifeline domestic consumers of the category ‘residential A-1’in respect of, namely, “Financing cost Surcharge”. The collection of the financing cost surcharge will be deposited by Discos in a fund called the “Financing cost Fund” to be kept in the escrow account of the CPPA for exclusive use for discharging the liabilities of the power producers. 

The sources said when Power Holding Company Limited (PHCL) was established in 2009, it was decided that all the loans parked in the company’s books at that time will be converted into national debt and this has already been done.

The government has imposed financing charges on current loans availed by the power distribution companies as per their share which according to power sector experts is totally illegal. When contacted a spokesman for Water and Power Ministry confirmed that there was a slight impact of surcharges but overall tariff is down as compared to previous year. “Bills of June 2015 are higher than the previous month but certainly are less than previous year,” he added. He maintained that the Discos should be asked why they did not pass on FPA to consumers.