With almost 55 per cent electricity generation from cheaper domestic resources with static prices, the National Electric Power Regulatory Authority (Nepra) on Tuesday finalised Rs3.10 per unit increase in tariff for ex-Wapda distribution companies (Discos) on account of monthly fuel cost adjustment (FCA) to mop up additional Rs26 billion from consumers in February’s bills.

“The Central Power Purchasing Agency (CPPA) had in its petition demanded Rs3.12 per unit FCA for power consumed in December 2021. This, however, works out to be Rs3.10 based on our scrutiny of the data provided by the CPPA,” said Nepra in a press release, adding a notification would be issued after further verification of evidence.

The CPPA, on behalf of all ex-Wapda Discos had sought about 56 percent increase in their fuel price adjustment Rs3.12 per unit (kWh) for electricity sold in December 2021 to generate about Rs26.7bn additional funds. The regulator, however, finalised Rs3.10 per unit additional FCA after minor disallowances.

It has become increasingly common that reference fuel costs approved by the government and the regulator turn out to be highly unrealistic, a question mark on their economic and financial analytical skills. In recent months, the actual fuel costs have ranged 44 percent to 116 percent higher than the reference rate.

This results in sudden price shocks to consumers on account of monthly fuel adjustments on top of repeatedly increasing base power tariffs apparently at the behest of foreign lenders.

This comes at a time when the government wants consumers to utilise more electricity to reduce the impact of capacity charges. The hearing was informed that industrial electricity consumption had increased by 19 percent because of the industrial support package.

On behalf of Discos, the CPPA has claimed the consumers were charged a reference fuel cost of Rs5.535 per unit in December 2021, but the actual cost turned out to be Rs8.66 per unit, hence an additional charge of about Rs3.12 per unit to consumers. The regulator calculated the actual fuel cost at Rs8.64, with an additional fuel price adjustment of Rs3.10 per unit.

The higher electricity rates would be charged to all consumers in the current billing month except those using less than 50 units. This tariff is not applicable to KE consumers directly, although a part of it subsequently becomes part of KE’s tariff adjustments on account of its import from the national grid.

Data showed that the share of domestic fuel sources in overall power generation in December was robust (56 percent) but lower than that of November 2021. The share of hydropower supply in the overall basket was reported at 20 percent in December 2021 compared to 33.2 percent in November and 23.26 percent in October. Hydropower has no fuel cost.

This was followed by another major chunk of 17.6  percent supply coming from nuclear power at just Rs1.05 per unit fuel cost. Yet another big contribution of about 13.8 percent came from domestic gas at a generation cost of Rs7.75 per unit. Its share also increased from 13 percent in November, 9.67 percent in October, 8.9 percent in September and 8.17 percent in August 2021. The three renewable energy sources wind, bagasse and solar together contributed 4 percent power supply. Wind and solar have no fuel cost, while that of bagasse has been calculated at Rs5.98 per unit.

On the other hand, coal-based power plants contributed about 24 percent supply to the national grid in December significantly higher than 16.3 percent in November. Its fuel cost also increased to Rs13.31 per unit in December against 13.14 per unit in November and Rs11.37 in October.

The LNG-based power contribution dropped further to 13.5 percent in December against 14.25 percent in November, 23.93 percent in October, 18.9 percent in September and 18 percent in August. The RLNG based power generation also increased to 17.81 per unit in December against 17.2 per unit in November.

Interestingly, the most expensive power generation cost came from furnace oil-based plants at Rs22.24 per unit which contributed about 4 percent share to the overall basket.


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