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Another Power Tariff Increase on the Horizon

Government seeks tariff increase of Rs. 2.31/unit for six months rather than NEPRA’s request of Rs. 5.4/unit for three months to manage ‘price shock’

by Staff Report

File photo. Rizwan Tabassum—AFP

The Power Division on Wednesday urged the National Electric Power Regulatory Authority (NEPRA) to impose a net tariff increase of Rs. 2.31/unit for six months, rather than the previously sought Rs. 5.4/unit for three months, to manage the “price shock” that is triggering protests and a reduction in consumption, impacting the planned revenue generation.

The government had earlier sought to collect Rs. 146 billion from consumers as a quarterly tariff adjustment, covering April-June 2023, by imposing a Rs. 5.4 unit increase over three months. However, during a public hearing organized by NEPRA on this request, the Power Division amended its demand, saying consumers should be charged Rs. 3.55/unit for six months—from October 2023 to March 2024—after the expiry of an existing quarterly adjustment of Rs. 1.24/unit to further reduce the impact on consumers, leaving a net increase of Rs. 2.31/unit.

NEPRA Member Rafique Shaikh asked the Power Division to submit a written request for staggering the quarterly tariff adjustment over six months, with the authority saying it would make a final determination after examining relevant records and legal documents. It also asked for a written assurance from the Power Division that a potential decrease to the cash flow of distribution companies (DISCOs) from expanding the adjustment to six months would not be transferred to consumers.

NEPRA further avoided taking any decision on a Power Division demand for simultaneous application of rates for K-Electric consumers without a separate hearing process. The government argued that this had been approved as a policy guideline by the previous federal cabinet, but NEPRA Member Amina Ahmad said documentation available with her only contained approval from the Economic Coordination Committee and not the federal cabinet. The Power Division maintained the cabinet had ratified the ECC decision, and said it would provide documentary evidence to this effect.

During the hearing, NEPRA also voiced concern over a drop in electricity consumption nationwide, noting this had imposed roughly Rs. 150 billion in additional impact on the remaining consumers. All members noted DISCOs appeared to lack clarity on the reasons for the 13% decline, as sales for April-June were estimated at 37,645 Gigawatt hours (GWh) but only 32,661 GWh was sold.

Some DISCOs argued that the decline in electricity demand was linked to the closure of industries, while others suggested it was due to milder-than-usual weather. Overall, per the hearing, the demand at TESCO reduced by 41%; HESCO by 19%; PESCO by 16%; SEPCO by 15%; and GEPCO and LESCO by 14% each during the April-June 2023 quarter.

Expressing alarm over this situation, NEPRA also questioned why over 350,000 applications for new connections were pending with DISCOs at end-July even as consumption declined. This, said the members, had resulted in a higher impact of capacity charges on the remaining consumers. If this continued, they warned, it could contribute to circular debt.

The NEPRA hearing comes as a campaign is already underway in Azad Jammu and Kashmir to not pay hefty utility bills. The Jamaat-e-Islami has also expressed plans to spread the campaign in Karachi, though it remains unclear if it would follow through on its threats.

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