Consumers Might be Forced to Pay for Debts of Power Companies

You pay your electricity bills regularly and are an honest consumer. Well, the government doesn’t really care about that if certain new measures come to pass. They are now going to charge normal consumers to pay off debts that the power companies owe the government.

The consumers will now be forced to pay a debt servicing surcharge in the upcoming tariff adjustment. It will be used to clear liabilities of all power companies.

The Economic Coordination Committee (ECC) held a meeting last month where the Finance Ministry suggested the Ministry of Water and Power to work on the proposed term finance facility of Rs 25 billion for power distribution companies by using a levy debt surcharge which will be paid by the end customer instead. In simpler words, the consumers have to pay for the billions in debts which these power companies had to pay.

Power Companies will clear their debts by forcing the consumers to pay them an additional surcharge

The power companies are facing financial troubles, making it hard for them to pay their own long due bills to the Central Power Purchasing Agency (CPPA). The cause is stated to be high distribution losses, subsidy arrears which have gathered over the years, low revenue collection and lower applicable tariff which does not cover all the costs.

“This levy is permissible under Section 31(5) of the NEPRA Act and could be accommodated in the upcoming tariff adjustment.” – The Ministry of Finance.

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Officials say that these problems have limited the power companies’ cash flow so they cannot settle their payments with the CPPA. Consequently, the CPPA does not have enough money to pay off the independent power producers (IPPs) and state-owned generation companies on behalf of the power companies. This ends up affecting the whole electricity generation process.

The Ministry of Finance offers monthly subsidy claims to the power companies. During the current fiscal year, Rs 118 billion were allocated for these subsidies.

However, the amount is being increased to Rs 125 billion in order to accommodate additional payments during the remaining period. Spillover subsidy claims from previous years would be dealt with later.

The Ministry of Water and Power told the ECC that the power generation companies and the IPPs were being paid using the revenues generated from the consumers. Fuel Price adjustment and subsidies were also being taken into account. Dues of the power distribution companies up to March 2016 stand at about Rs 168 billion. The ministry is working on settling this amount.

It has been proposed that the power companies should borrow money from banks to clear the CPPA payments. However, the customers might also be forced to pay them (in the next tariff) on the companies’ behalf to assist them with their financial troubles caused by their own management mistakes and misuse of funds.

He is the Editor at ProPakistani.