Nepra Approves Rs1.90 per Unit Increase in Electricity Tariff for Q4 FY2023-24

Introduction

The National Electric Power Regulatory Authority (Nepra) has approved a significant increase in electricity tariffs, raising rates by up to Rs1.90 per unit under the quarterly adjustment for the fourth quarter of the financial year 2023-24. This decision is set to impose a financial burden of approximately Rs46 billion on consumers across the country, including those served by state-owned power distribution companies (DISCOs) and the private utility K-Electric.

Details of the Tariff Increase

The approved tariff hike is primarily attributed to lower electricity demand, reduced utilization of Maximum Demand Indicators (MDI), and aggregate technical and commercial (AT&C) losses that have resulted in load-shedding. The additional cost will be recovered from consumers of various DISCOs and K-Electric, with the total amount to be collected reaching Rs46.805 billion.

This amount is broken down as follows:

• Capacity Charges: Rs22.867 billion
• Variable Operation and Maintenance (O&M) Costs: Rs3.566 billion
• Use-of-System Charges and Market Operator Fee: Rs7.513 billion
• Transmission and Distribution (T&D) Losses: Rs11.067 billion
• Net Metering Costs: Rs1.792 billion

Despite the significant increase, Nepra Chairman Waseem Mukhtar assured the public that consumers would receive a net relief of Rs1.80 per unit in their September 2024 bills. This relief is expected due to a Rs0.31-per-unit reduction in fuel charges adjustment for July 2024 and a Rs0.90-per-unit decrease in the quarterly tariff adjustment for the third quarter.

Impact on K-Electric and Government Subsidy

The impact of the tariff adjustment for K-Electric consumers will be borne by the government through a subsidy. This move aligns with the federal government’s policy of applying uniform quarterly adjustments across all consumer bases, including those served by K-Electric.

Challenges Faced by DISCOs and Criticism

During the public hearing, Nepra members expressed concerns about the performance of DISCOs, particularly regarding their handling of AT&C losses-driven load-shedding and capacity payments to independent power producers (IPPs) for unused booked capacity. Member Rafique Ahmad Shaikh specifically criticized DISCOs, such as Peshawar Electric Supply Company (Pesco), for denying consumers access to net metering facilities.

Furthermore, Fesco reported an 8% reduction in sales due to a growing shift towards solar energy. Nepra member Mathar Niaz Rana suggested imposing penalties on DISCOs that underutilize their allocated capacity, emphasizing the need for accountability.

Future Outlook and Promised Relief

Nepra Chairman Waseem Mukhtar highlighted that future tariff adjustments would likely be minor, provided current economic conditions remain stable. He assured that if Pakistan’s economic situation continues to improve, further relief could be granted to consumers in the form of reduced fuel charges adjustments.

However, the chairman also called on DISCOs to improve their management and ensure that consumers are not deprived of facilities like net metering, which could help alleviate some of the financial burdens faced by the public.

Conclusion

The recent approval of a Rs1.90 per unit increase in electricity tariffs by Nepra is set to impact millions of consumers across Pakistan. While the move is aimed at addressing lower demand and AT&C losses, it raises concerns about the financial strain on households. However, with promises of future relief and a focus on improving DISCO performance, there is hope that the burden on consumers will be alleviated in the coming months.