• After raising base tariff, Nepra okays Rs29bn fuel cost adjustment
• Allows KE, Discos to charge Rs2.31, Rs1.81/unit more for power used in June

ISLAMABAD: A day after notifying a massive increase in basic electricity prices, the power regulator on Wednesday allowed K-Electric and other distribution companies (Discos) to charge an additional Rs29 billion from their consumers at the rate of Rs2.31 and Rs1.81 per unit, respectively, as monthly fuel cost adjustment (FCA).

The consumers would be charged this extra amount in their August bills for the electricity they used in June.

The decision was taken at two separate public hearings presided over by Tauseef H. Farooqui, the chairman of the National Electric Power Regulatory Authority (Nepra).

In its petition, Karachi’s power utility sought Rs2.34 per unit FCA to recover an additional Rs4.4bn. However, Nepra approved an increase of Rs2.31 per unit.

Likewise, Discos demanded Rs1.885 per unit additional FCA to tap Rs25bn, but the regulator approved Rs1.81.

The additional costs have accrued despite over 58pc power generation from cheaper domestic fuels, which was slightly higher than 56pc in May and 54pc in April.

The monthly adjustment costs have come even though the average base power tariff had gone up by more than Rs7 per unit and the cost of imported fuel like furnace oil and liquefied natural gas (LNG) dropped.

A key reason behind the FCA was the relatively lower availability of hydropower generation (30pc of the basket share) than estimated in the pre-determined reference tariff. The contribution of hydropower generation, which has no fuel cost, in the overall national power grid in May was 27pc against 24pc a month earlier.

The LNG-based power generation at 18.55pc of the total power supply in June was down from 24.33pc in May but maintained its second position after hydropower.

The third largest share came from coal-based generation at 17.75pc in June compared to 16.78pc in May. The nuclear generation slightly improved to 13.54pc in June compared to 12.6pc in May but was still way behind its 19pc in April and 24.28pc in February.

Power supply from domestic gas also dropped to 8.54pc in June against 10.35pc in May and 12pc in April.

The fuel cost of furnace oil-based power generation increased to Rs26.1 per unit in June against Rs23.24 per unit in May. The LNG-based power generation slightly dropped to Rs24.07 per unit in June against Rs24.5 per unit in May. Furnace oil-based generation increased to 5.4pc in June against 1.96pc share in May.

The Central Power Purchasing Agency (CPPA) claimed on behalf of Discos that the consumers were charged a reference fuel cost of Rs7.51 per unit in June, but the actual cost turned out to be Rs9.39 per unit, hence an additional charge of Rs1.885 per unit.

The cost of power generation from domestic gas slightly dropped to Rs11.74 per unit in June against Rs12.45 in May but was higher than Rs10.07 in February because of an increase in gas prices notified by the government.

In contrast, the cost of coal based-power generation increased to Rs14.05 per unit in June, significantly higher than Rs10.5 in May.

Three renewable energy sources — wind, bagasse and solar — together contributed about 5.6pc in June against 6.6pc in May. Wind and solar have no fuel cost. The cost of bagasse-based generation remained unchanged at Rs6 per unit.

The fuel cost adjustment is reviewed every month as per the tariff regime applicable across the country and usually applies to consumer bills for one month only.

The higher FCA, on notification, would be charged to all consumer categories except lifeline power consumers, domestic consumers consuming up to 300 units, and agricultural consumers and electric vehicle charging stations.

The adjustment on account of monthly FCA also applies to domestic consumers having time-of-use (ToU) meters, irrespective of their consumption level.

Under the tariff mechanism, changes in fuel cost are passed on to consumers only on a monthly basis through an automatic mechanism.

In contrast, quarterly tariff adjustments for variations in the power purchase price, capacity charges, variable operation and maintenance costs, use of system charges and the impact of transmission and distribution losses are built into the base tariff by the federal government.

Published in Dawn, July 27th, 2023