National Electric Power Regulatory Authority (NEPRA) has approved the federal government’s request for a Rs. 3.28 per unit tariff hike for all consumers nationwide from October 2023 to March 2024. The impact of this decision is expected to exceed Rs. 200 billion.
This rate increase has been authorized under the Quarterly Tariff Adjustment (QTA) mechanism, aimed at addressing the additional financial burden caused by factors such as currency devaluation and interest rate hikes, among others.
Initially, the Energy Ministry’s Power Division requested a Rs. 6.20 per unit rate increase for the fourth quarter of the 2022-23 fiscal year to address a Rs. 146 billion financing gap within three months. In response to public protests, they adjusted it to a six-month staggered recovery plan at Rs. 3.55 per unit.
Subsequently, the Power Division also approached NEPRA to allow the application of similar rates to K-Electric consumers, to ensure uniformity and reduce the subsidy payable to them.
Following thorough public hearings and data examination, NEPRA arrived at a positive adjustment figure of Rs. 135.584 billion.
This adjustment takes into account various factors, including variation in capacity charges, variable O&M (Operations and Maintenance) costs, additional recovery on incremental sales, use of system charges, market operator fees, and the Financial Cost Adjustment (FCA) impact on Transmission and Distribution (T&D) losses for the fourth quarter of the fiscal year 2022-23.
NEPRA’s approved rate of Rs. 3.2814 per unit, effective October 1, 2023, along with an 18% GST, is expected to cost distribution companies (Discos’) consumers an estimated Rs. 160 billion, or Rs. 3.87 per unit.
While the government or NEPRA did not disclose specific details regarding the financial impact on K-Electric consumers, an official source indicated that it would be slightly over Rs. 40 billion, bringing the total to over Rs. 200 billion.
This Quarterly Tariff Adjustment (QTA) is in addition to a prior increase of up to Rs. 7.5 per unit which took effect on July 1, 2023, with a financial impact of Rs. 890 billion, excluding the 18% GST and subsequent monthly fuel price adjustments.
A key factor behind this extra quarterly expenditure, as indicated by Discos and the Power Division, is the 13% lower electricity consumption by Discos compared to the estimates used by relevant authorities when establishing reference rates.
While the initial projection for electricity sales during the April-June 2023 period was 37,645 gigawatt hours (GWh), the actual figure stood at 32,661 GWh.