ISLAMABAD: National Electric Power Regulatory Authority (Nepra) has approved an average increase of Rs 7.91 per unit in base tariffs of power Distribution Companies (Discos) for FY 2022-23 taking it to Rs 24.82 per unit (47pc) from existing rate of Rs 16.91 per unit, which was prior action agreed with the IMF and World Bank.

The regulator has recommended a massive increase in tariffs of Discos at a time when the people are facing load-shedding of 10-16 hours daily due to shortfall ranging from 7500MW to 8000MW as the government is unable to purchase expensive imported fuels like furnace oil, LNG and coal.

The regulator has released determinations of Islamabad Electric Supply Company (IESCO), Gujranwala Electric Power Company (Gepco), Lahore Electric Supply Company (Lesco), Multan Electric Power Company (Mepco), Faisalabad Electric Supply Company (Fesco), Peshawar Electric Supply Company (Pesco), Tribal Electric Supply Company (Tesco), Quetta Electric Supply Company (Qesco), Hyderabad Electric Supply Company (Hesco) and Sukkur Electric Supply Company (Sepco).

Nepra determined tariff for different end-consumers for each distribution company, owing to their different revenue requirements and allowed different level of T&D losses. Mepco, Gepco, Hesco, Sepco, Qesco, Pesco & Tesco filed multi-year tariff petitions for the FY 2020-21 to FY 2024-25 whereas IESCO, Lesco & Fesco filed annual adjustment/indexation request under the already allowed multi-year tariff.

The tariff has been determined for the FY 2022-23, which on national average is Rs24.82/kWh, higher by Rs7.9078/kWh than the earlier determined national average tariff of Rs16.91/kWh.

The increase of Rs7.9078/kWh is mainly due to increase in fuel prices, capacity cost and impact of rupee devaluation. Energy Purchase Price (EPP) is projected as Rs1.152 billion whereas capacity charges including NTDC and HVDC cost is projected as Rs1.366 billion.

Total revenue requirement of Discos including their margin and Prior Year Adjustment (PYA) is projected as Rs2.805 billion with projected sales of 113,001 GWh.

Nepra says that Mepco, Gepco, Hesco, Sepco, Qesco, Pesco & Tesco have been allowed an investment of around Rs406 billion for their distribution investment programme for the five-year period.

Discos allowed Transmission and Distribution (T&D) losses have been reduced from 13.46 percent to 11.70 percent for the FY 2022-23.

The determined tariffs have been intimated to the federal government. The federal government as per Nepra Act is required to file an application for determination of uniform tariff for all the Discos. The uniform tariff so determined by Nepra after incorporating the amount of subsidy/surcharges, intimated by the GoP, is forwarded to the GoP for notification. The tariff once notified is then charged to the consumers.

The government is to pass additional financial burden of over Rs280 billion to the consumers as Fuel Cost Adjustment (FCA) in the next three months i.e. May and June and July, 2022, due unprecedented rise in fuel prices in the international market.

According to the World Bank, there have been delays in annual tariff rebasing and Quarterly Adjustments (QTA) which were included in five Priority Actions (PA5), resulting in increased circular debt. Half of the increased circular debt compared to earlier projections (which were close to CDMP target) is attributable to exogenous factors (i.e. inflation and Rupee depreciation), rest is because of delayed tariffs.

The World Bank warned the government a couple of weeks ago that further delays in tariff adjustments and Karachi Electric (KE) settlement risk circular debt flow for FY22 to reach Rs350 billion, expecting over Rs500 billion addition to the circular debt due to delay.

Talking about priority policy actions and decisions, World Bank Country Director Najy Benhassine, in a letter to Power Minister, urged the government to notify phase two of the subsidy rationalization as soon as possible and the relief package launched in February should be ended or quickly phased out. The purpose of the rationalization is to allow for the subsidies to domestic consumers to be better targeted, ensuring that they only benefit the most vulnerable consumers. In FY20, 97 percent of domestic consumers benefitted from subsidies, which included non-poor and those with vested interests; lack of targeting creates unnecessary additional financial burden for the government.

“The current relief package has further distorted this scheme, making subsidies even more regressive, and undermining the efforts made so far,” the Bank observed. The government will not extend the package expiring on June 30, 2022.—MUSHTAQ GHUMMAN