NEPRA reserves judgment over govt’s request for increased power surcharge  

ISLAMABAD: The National Electric Power Regulatory Authority (NEPRA) on Thursday reserved its judgement on a petition filed by the federal government requesting another increase in electricity prices for consumers.  

During the hearing, the representatives of the power division faced severe backlash from the regulator in light of its request for a hike in the rate of power surcharge from the next financial year (FY24).

The amount that will be recovered through this additional surcharge is earmarked to reduce the circular debt and pay for power theft costs at the end of the power distribution companies (DISCOs).

Though NEPRA has already allowed the government to recover Rs 1.43 per unit surcharge from the power consumers in the upcoming financial year, the government in a petition said that it was not enough to meet the requirements.

Therefore, another request for an increase of Rs 1.80 per unit was made by the government which would take the total to Rs 3.23 per unit to be charged from electricity consumers in the coming year to pay off debt and cost of power theft of inefficient power companies.

In order to arrive at a just and informed decision on the request of the federal government regarding imposition of the additional surcharge on electricity consumers, on Thursday Nepra conducted a hearing headed by NEPRA chairman Tauseef H. Farooqi.

The representative of Khyber Pakhtunkhwa in NEPRA, Maqsood Anwar questioned “how far will this matter go”? He further expressed his fear that the government will submit more applications to raise the price even further.

Chairman NEPRA questioned and pleaded with the federal government representatives stating, “let the people breathe a sigh of relief”. He also questioned why the government is so eager to jack up prices intended for next year. 

The problems of our power sector are serious and circular debt is increasing rapidly, officials said.

The representative of Sindh at NEPRA, Rafiq Ahmad Shaikh lashed out at power ministry officials over requesting further increase in power surcharges.

Shaikh also took a jab at the DISCOs stating, “Why should people be punished for the poor performance of DISCOs?”

He called for resolving the problems of electricity companies which would somewhat remedy the ailing power sector and also highlighted that NEPRA is also here to protect the rights of the users in order to prevent any form of injustice.

Member Balochistan NEPRA, Mathar Niaz Rana, seconded Shaikh’s concerns over poor performance of power distribution companies and called for addressing the governance issues within the companies.

There is a lot of criticism of us, Rana said. Casting a dark cloud over the preceding he added that what confidence can we give to the customers about when the situation will be fixed?

Amina Ahmed, the representative of Punjab at NEPRA, asked the power division official not to mislead the authority and the public regarding imposition of this additional surcharge.

She said that the federal government can levy a surcharge but asked for an explanation of the matter.

Power division officials said that circular debt stood at Rs 2.6 trillion which included payments to IPPs and Power Holding Company’s debt.

It is not NEPRA’s job to impose this surcharge, Chairman NEPRA said, adding that imposition of power surcharge will not resolve the issue of circular debt any more.

Is it a right act that the ministry is controlling the power sector, Chairman NEPRA questioned.

In the current situation, the tariff of the industrial sector will reach Rs 50 per unit, Tanveer Bari, representative of Karachi Chamber of Commerce and Industry said.

Bari further added that the Karachi Chamber of Commerce and Industry rejected the request for a power surcharge increase.

Power division officials trying to respond to these concerns stated that the government was facing problems in paying off dues to expensive Chinese coal-fired power plants.

They said that the power division had also submitted a payment plan to IPPs to the Finance Division.

According to the petition, the federal government has requested that the already approved surcharges of Rs 1.43 per unit was not enough to meet the electric services obligations of the government.

It is relevant to note here that the NEPRA has already allowed the Federal Government to impose an additional surcharge of Rs 3.39 per unit and Rs 1 per unit from March-June 2023 and July 2023 to June 2024, respectively, with a cumulative impact of Rs 149 billion on power consumers.

With the application of an additional Rs 3.39 per unit, the total surcharge becomes Rs 3.82 per unit for the four months of 2022-23, having an impact of Rs 75 billion.

For FY 2023-24, the additional surcharge of Rs 3.39 per unit will be reduced to Rs 1 per unit to cover the additional markup charges of PHL loans not covered through the already applicable FC surcharge of 0.43 per unit.

The total surcharge becomes Rs. 1.43 per unit for FY 2023-24, having an impact of Rs. 74 billion.

In view thereof, the Authority (NEPRA) has decided to allow the application of the surcharge to be recovered from different categories of consumers of K-Electric, for the period from March to June 2023 and for FY 2023-24, to cover the markup charges of PHL loans.

The Power Division said that the additional surcharge is intended to cover the markup charges of PHL loans not covered through the already applicable FC (financing cost) surcharge of Rs 0.43/unit.

It was also explained that with these additional surcharges, an additional amount of Rs 75 billion will be billed for the period from March to June 2023, against which around Rs 68 billion will be recovered at an expected recovery rate of 90%.

Similarly, for FY 2023-24, with the additional surcharge of Rs 1 per unit, an amount of around Rs 74 billion will be recovered, assuming a recovery rate of 90%

According to sources, if the government imposes Rs 3.23/unit surcharge then electricity consumers across the country will face an additional burden of approximately Rs 335 billion in 2023-24.

It is pertinent to mention that NEPRA will issue its detailed judgment after scrutiny of the data and this surcharge will be applicable on the power customers of the K-Electric.