Electricity tariff for Karachiites raised by Rs3.23 for June-September

ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) on Friday notified up to Rs3.23 per unit additional increase in electricity rates for consumers of K-Electric for four months — June to September — to clear a nine-month backlog of fuel cost adjustments (FCA).

KE had sought about Rs18.6 per unit cumulative FCA for three quarters (July 2023 to March 2024) of the outgoing fiscal year to extract up to Rs26billion from the consumers at varying rates ranging between an increase of Rs4.96 to 96 paise per unit for seven months and a reduction of Rs1.28 to 1.48per unit for two months.

Nepra provisionally allowed about half of the adjustment and staggered it in a manner that the consumers would be paying about Rs2.68 per unit additional FCA in June, followed by Rs3.11 per unit in July, Rs3.22 per unit in August and about Re1 per unit in September “in order not to overburden the consumers”.

In this way, KE is expected to mop up about Rs12bn in four months.

In doing so, the regulator clubbed the positive FCA of Rs4.49 for October 2023 with Rs1.82 per unit negative FCA, resulting in a net additional burden of Rs2.68 per unit to consumers in June.

Likewise, the two positive FCAs of Rs1.71 and Rs1.40 per unit were put together for July and September 2023, adding a total additional burden of Rs3.11 per unit on consumers in July 2024 bills.

Similarly, three smaller positive FCAs of 66 paise, Rs1.77 and 79 paise for August, November and December 2023 were clubbed together. This would mean an additional burden of about Rs3.22 per unit on consumers in August bills.

It also combined a positive FCA of Rs2.97 for January with a negative Rs1.97 per unit for March, with a net addition of about Re1 per unit in September billing.

Interestingly, Nepra member Sindh Rafique A. Shaikh, who presided over the public hearing on KE’s request for a nine-month fuel cost, did not sign the determination, while Chairman Waseem Mukhtar, who was on a foreign visit at the time, was among the four signatories to the decision.

KE, in a statement, welcomed the Nepra’s notification, saying the customers of other Discos in the country had already undergone a similar process of paying FCA on a monthly basis, with an average rate of approximately Rs2.89 per unit for the same period (July 2023 to March 2024), while the provisional FCA allowed to KE averaged Rs1.26 per unit.

The regulator said that it was allowing provisional FCAs at the request of KE to avoid a sudden shock to consumers and noted that under Section 31(7)(iv) of the Nepra Act, fuel cost adjustments are to be made within the approved tariff.

However, as the multi-year tariff (MYT) for the 2023-30 period “is not yet in effect and remains to be determined, the approved tariff applicable in the instant case is the interim tariff as determined by” it.

Therefore, the reference fuel cost number, as allowed in the interim tariff for the quarter of January to March 2023, had been considered while reaching these additional FCAs.

KE proposed three different options for additional FCA recovery from consumers on a “provisional basis” to clear the backlog and avoid a sudden increase in burden on its consumers.

Under the first scenario, KE proposed that the FCA be calculated as the difference between the actual fuel cost and the reference monthly fuel cost as per the interim tariff currently in place.

In this option, KE sought an increase in rates for seven months and a reduction in two months, with a net additional revenue of about Rs20bn. The cumulative net impact for nine months is about Rs13 per unit or an average of Rs1.45 per unit per month.

In the second option, KE demanded that it be allowed to charge consumers the difference between the actual and reference monthly fuel cost as per the tariff petition filed by KE and currently under Nepra’s deliberation.

In this case, the utility has also sought an increase in fuel cost for seven months and a reduction in two months with a net accumulative additional fuel cost of Rs18.6 per unit at a monthly average of Rs2.06 per unit for nine months to raise about Rs26bn.

In the third scenario, the utility demanded additional FCA for seven months and a cut in two months. The net combined impact amounted to Rs16.9 at a monthly average of about Rs1.90 per unit and entails a financial impact of about Rs22bn.