Paying consumers to foot defaulters’ power bill

ISLAMABAD: While struggling to recover more than Rs1.3 trillion in outstanding dues from chronic private defaulters, the government on Friday sought the immediate application of an additional cost of about Rs1.45 per unit to paying power consumers for three months to mop up another Rs52 billion.

At a public hearing presided over by Natio­nal Electric Power Regu­latory Authority (Nepra) Chairman Waseem Mukhtar, the Power Division requested the immediate application of Rs1.45 per unit additional cost under the quarterly tariff adjustment (QTA) for the third quarter (January-March 2023-24) across the country, including K-Electric, in view of the upcoming annual tariff rebasing effective from July 1.

The government has already filed petitions for about a 25 per cent increase in the base national electricity tariff to take effect from July 1, 2025, to raise about Rs1.2bn additional revenue next year and ensure an annual revenue requirement of about Rs4tr in FY2024-25 for power companies.

The Power Division team, led by Joint Sec­retary Mehfooz Bhatti and comprising representatives of the Central Power Purchasing Age­ncy (CPPA) and other entities, argued that a Rs2.75 per unit QTA was being charged to consumers that would end in June. Normally, the next QTA of Rs1.45 per unit should come into force from July 1.

Struggling to recover Rs1.3tr from ‘chronic defaulters’, govt seeks immediate Rs1.45 per unit hike for three months

They argued that since the average tariff would become slightly cheaper with the repla­cement of the current Rs2.75 per unit QTA with the next QTA of Rs1.45 per unit, the regulator should also consider the application of the base tariff increase, which envisaged an increase of about Rs4.41 to Rs6.51 per unit for next year from the existing average national tariff of Rs29.78 per unit.

Nepra promised to carefully consider these issues and hinted at allowing the Rs1.45 per unit QTA for the next three months, i.e., July, August, and September of the next fiscal year. On a question, Mr Bhatti said that the outstanding amount against private chronic defaulters was about Rs1.3tr, with some of these dues as old as ten years. He said the government’s campaign against theft and non-payments had yielded about Rs104bn as of May 9, 2024, which also included about Rs10.9bn recovered against theft.

Responding to a question, chief executive offi­cers of Hyderabad and Sukkur electric supply companies reported that their consumers were sh­i­fting to solar energy instead of clearing their dues, presenting a new cha­llenge. However, Nepra’s member from Sin­dh, Rafique A. Sha­ikh, said it was hard to believe that people could live without power supply in 45-degree Celsius weather, as solar could only serve them during the daytime. He ordered that an independent survey be conducted and its report submitted to the regulator to ascertain the veracity of such claims.

A Nepra official repo­rted that about 1,000MW of grid power had shifted to solar by December last year, which had now reached close to 2,000MW.

In their separate tariff petitions, the distribution companies (Discos) have pushed to raise about Rs51.88bn from their consumers in the coming three months under QTA for the January to March period.

The increase has been sought by the Discos to finance the additional financial impact of capacity charges arising from currency devaluation and interest rates, in addition to the market operator fee, the impact of transmission and distribution losses on fuel cost adjustments, and variable operation and maintenance charges for the third quarter of the current fiscal year.

Under the petitions, the Disco from Peshawar has demanded the highest claim of Rs14.72bn, followed by Rs9.3bn by Faisalabad Electric, Rs8.17bn by Islamabad Electric, and Rs5.4bn by Hyderabad Electric. They are followed by a Rs5.39bn claim from Quetta Electric, Rs3.62bn by Lahore Electric, and Rs3.6b by Multan Electric. Another Rs2.8bn claim has been filed by Sukkur Electric. Gujran­wala and Tribal Electric companies have proposed a reduction of Rs900 million and Rs560m, respectively.

The biggest chunk of the additional cumulative burden on account of capacity charges has been claimed by Discos at Rs31.4bn for the quarter, followed by Rs5.5bn on account of variable charges.

Upon approval, the adjustment would be recovered on a uniform basis from all consumers except for lifeline users. Under the tariff mechanism, changes in fuel costs are passed on to consumers only on a monthly basis through an automatic mechanism, while quarterly tariff adjustments on account of variations in 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, May 18th, 2024