Govt to extract Rs29bn more from electricity consumers for April

The government has approached the National Electric Power Regulatory Authority (Nepra) seeking approval for an additional fuel cost adjustment (FCA) of Rs3.5 per unit, aiming to collect over Rs29 billion from consumers for electricity consumed in April.

This proposal is unexpected given that 75% of the electricity supplied in April was generated from cheaper local fuels. The Central Power Purchasing Agency (CPPA), a subsidiary of the Power Division, has filed a formal petition with Nepra, requesting an increase of Rs3.4883 per kWh over the reference tariff of Rs5.492 per unit charged to consumers in April.

The proposed FCA is nearly 64% higher than the pre-fixed fuel cost of Rs5.49 per unit, raising concerns about the power sector’s ability to accurately forecast fuel costs even 6-7 months in advance. Recently, additional FCAs have ranged from 50% to 115% higher than the pre-determined fuel costs set at the start of the fiscal year.

This increase in FCA compounds a 26% rise in the annual base tariff and an additional 10% hike under the quarterly tariff adjustment, currently charged at Rs2.75 per unit. Consequently, consumers face escalating bills as consumption rises with the temperature, despite the predominance of local resources in electricity generation. Nepra has agreed to hold a public hearing on May 30 to discuss the request.

The higher proposed FCA is attributed to the lower availability of hydropower, higher domestic coal and gas prices, and increased utilization of LNG. In its petition, the CPPA, acting as the commercial agent for Discos, demanded an additional FCA of Rs3.488 per unit for June billing for electricity consumed in April.

The CPPA noted that the reference fuel cost for March was Rs5.49 per unit, but the actual cost reached Rs8.98 per unit. Approximately 8,639 GWh of electricity was generated at a fuel cost of Rs79.56 billion (Rs9.21 per unit) in April, with 8,375 GWh delivered to Discos at Rs75.2 billion (Rs8.98 per unit), the difference being due to previous adjustments.

Consumption in April was nearly 14% lower than the same month last year, totaling 9,734 GWh, mainly due to lower temperatures, economic slowdown, and shifts to alternative energy sources.

The Rs3.5 FCA for April is 75% higher than the Rs2 per unit charged in the same month last year. LNG-based power generation accounted for 25% of the national grid in April, overtaking the usual hydropower supply, which contributed 24%, down from 28% in March. Hydropower, which has no fuel cost, is typically a significant component of the energy mix.

Nuclear power provided about 24% of the grid’s electricity in April, a slight decrease from 26% in March. Local gas contributed 11.2%, up from 10% in March, while local coal’s share dropped to 10% from 11% in March.

The cost of LNG-based power increased to Rs22.8 per unit in April, up from Rs22.2 per unit in March. Domestic gas-based generation costs decreased slightly to Rs13.25 per unit from Rs13.7 per unit in March, while local coal-based generation costs fell to Rs15.8 per unit from Rs16.8 per unit. Imported coal-based generation remained minimal, contributing less than 0.3%.

Renewable energy sources, including wind, bagasse, and solar, increased their share to 5.3% in April from 4.9% in March. Wind and solar have no fuel costs, while bagasse-based generation costs remained at about Rs6 per unit.

If Nepra approves the increase, the higher FCAs will be reflected in consumers’ bills in June.

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