Cabinet extends power tariff hike after expiry in November

ISLAMABAD: The government has extended a tariff increase that was meant for the first quarter of the fiscal year only, rather than letting it expire on Nov 30, essentially denying consumers the rate reduction that was due to them. The financial impact of total adjustment has been worked out by Nepra to be Rs167 billion including Rs73bn of first quarter 2019-20 and Rs94bn for second and third quarter.

The Power Division of the Ministry of Energy had proposed to the Federal Cabinet that an additional charge, inclusive of an already applicable additional charge, vide SRO dated Nov 29, 2019 be imposed”.

The federal “cabinet approved remaining adjustment in power rates for second and third quarter of 2019-20. This approval would not add any additional burden on consumers”, an official statement said.

An official said the previous quarterly adjustment for first quarter of 2019-20 had come to an end on Nov 30 and had now been replaced with a fresh equivalent increase for next 10 months to recoup a discount previously provided to consumers. “Quarterly adjustment of Rs0.1456/kWh (national average) for Q1 of 2019-20 expired on Nov 30, 2020,” said a summary submitted to the cabinet.

The cabinet was informed that under Section 31 (7) of Regulation of Generation, Transmission and Distribution of Electric Power Act 1997 and quarterly tariff adjustment mechanism, the National Electric Power Regulatory Authority (Nepra) had determined the periodic quarterly adjustments for 2nd and 3rd quarters of 2019-20 involving an cumulative average increase of Rs1.627 per unit for all consumers.

The Economic Coordination Committee (ECC) of the Cabinet approved the proposal to notify the tariff increase of Rs1.627 per kWh across all categories of consumers except life-line consumers on Sept 30, 2020.

The federal cabinet ratified the decision of ECC on Oct 6, 2020 with the direction that electricity price will remain unchanged for all consumers. Therefore the quarterly adjustments, determined by Nepra, was allowed for notification after incorporating cross subsidy and continuing the additional charges as imposed June 28, 2019, and Sept 30, 2019 so that electricity price remained unchanged.

The cabinet had further directed that the difference of Rs14.38bn will be adjusted as additional subsidy to power sector during current financial year. As a result of this decision, about 14-paisa per unit was allowed to Discos through replacement of Rs1.48 per unit charge that previously existed in tariff.

With the replacement of existing 14 paisa per unit charge with a new equivalent charge, the, Nepra determined “adjustments for second and third quarters of 2019-20 would be fully passed on to the consumers for the remaining 10 months of the determination”, said the Power Division, adding “the effective rate for the consumers will remain the same” but would not go down either after the expiry of existing quarterly adjustment charge.