Electricity Set to Become More Expensive as Govt Adds 3 Surcharges

The federal government has reimposed three surcharges on electricity consumers.

All three surcharges amount to a total of Rs 1.55 per unit that consumers would have to pay regularly. The reason behind this reimposition is government’s commitment to International Monetary Fund (IMF) and recovery of money lost through line losses.

More than Rs 110 billion were lost due to power theft, non-recovery, and system losses. The amount will be recovered at the expense of the general consumer.

These surcharges were deemed unconstitutional by Lahore High Court in 2015. However, the government challenged the orders in Supreme Court and got the previous judgment suspended.

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Breakdown of the Surcharge

National Electric Power Regulatory Authority (NEPRA) told that they were obliged by the law under section 31(5) of the Nepra law to allow the federal government to impose the surcharges.

Following three surcharges will be charged from the power consumers.

• Neelum-Jhelum Surcharge: 10 paisa per unit increase to accumulate Rs 7.5 billion annually.
• Financing Cost Surcharge: 43 paisa per unit increase in order to gather Rs 30-32 billion for debt servicing of Power Holding Private Limited.
• Tariff Rationalisation Surcharge: Rs 1.02 per unit increase to reduce the burden of subsidy on budget. Government is aiming to amass Rs 70 billion annually through this surcharge. This amount will be different for different distribution companies.

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The inability of power companies is also to be blamed for the imposition of surcharges, NEPRA said;

The Financing Cost Surcharge is a burden on the paying consumers as a result of inability of the Discos to realise the full amount. This also incentivises Discos to underperform.

A Bit of Relief

Power consumers of all companies except the K-Electric will see a relief in the form of a refund for the next month at least. The government has subsidized the electricity for residential and agriculture consumers, so consumers from these two sectors – who consume less than 300 units – will not get any refund.

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NEPRA charged Rs 7.26 per unit from consumers against a production cost of Rs 5.07. The Central Power Purchasing Agency (CPPA) has filed a petition in this regard to NEPRA to refund the overcharged amount of Rs 2.20 per unit to power consumers. The public hearing for this will be held on 27th March where it will be decided how much money will be refunded.

It is pertinent to mention here that companies charge this tariff in advance to generate billions of rupees as a windfall. This ensures a better cash flow with no financing costs at all.

The refund will be applicable because the fuel rates were low during the month of February.

Power Production Cost and Contribution

Power costs stand for each source of electricity generation for February went like this;

• 19.44% of total electricity production came from hydropower projects with zero fuel cost.
• 2% comes from wind and solar power plants.
• 8.33% of electricity was generated through furnace oil-based power plants. One unit of electricity through this process costs Rs 10.16.
• 15.79% of electricity was contributed by coal-based power projects. One unit through coal production costs Rs 5.8.
• 24% electricity at a cost of Rs 4.71 per unit was generated through natural gas-based plants.
• One unit of electricity through Regasified Liquefied Natural Gas (RLNG) was generated at a cost of Rs 9.02 in February. Power production through LNG contributed 19.2% to the total supply.
• 0.5% of electricity is imported from Iran at a cost of Rs 11.05 per unit.