Electricity bills are set to soar as the Central Power Purchasing Agency (CPPA) has requested an increase of Rs7.13 per unit in fuel charges for electricity consumed in January.
This adjustment is intended to generate an additional Rs57 billion for power distribution companies (Discos), marking the highest-ever fuel cost adjustment (FCA) proposed by the CPPA.
The increase, nearly 96% higher than the January pre-fixed fuel cost of Rs7.50 per unit, raises questions about the power sector’s ability to predict fuel costs.
This request comes amid existing tariff hikes, including a 26% annual base tariff increase and an 18% rise under the quarterly tariff adjustment, significantly impacting consumers’ bills.
The National Electric Power Regulatory Authority (Nepra) has scheduled a public hearing for February 23 to discuss this proposal.
The CPPA’s petition attributes the proposed FCA hike to higher domestic coal and gas prices, despite lower imported fuel costs and a stable exchange rate in January.
With approximately 8,314 gigawatt-hours of electricity generated at an estimated cost of Rs114.6 billion, the actual fuel cost surpassed the reference cost, necessitating the adjustment.
The energy mix in January saw a reduction in hydropower’s share due to annual maintenance, while nuclear power and imported liquefied natural gas (LNG) contributed significantly to the grid.
The cost of furnace oil-based generation decreased, whereas diesel and LNG-based generation costs varied, reflecting changes in fuel prices and power generation dynamics.
This FCA increase, pending Nepra’s approval, will be applied to March bills for all consumer categories, with exceptions for lifeline consumers, certain domestic users, agricultural consumers, and electric vehicle charging stations.
The tariff mechanism allows for monthly adjustments in fuel costs, aiming to reflect actual expenditures in consumer billing.
The CPPA proposes a hefty Rs7.13 per unit increase in fuel charges for January electricity consumption, aiming to generate Rs57 billion for power companies. This raises concerns for consumers’ bills. Nepra schedules a public hearing for transparency. Efforts to monitor fuel prices and ease the financial burden on consumers are crucial, requiring comprehensive reforms for sustainable and affordable electricity.