ISLAMABAD: Ostensibly owing to delays in tariff determination by the National Electric Power Regulatory Authority (NEPRA), the consumers of K-Electric are likely to face a potential hike of up to Rs 18.57 per unit on account of fuel charges adjustment (FCA) for nine months.
As per details, K-Electric (KE) has requested fuel charge adjustments (FCA) for a period spanning nine months, in which KE proposed an increase in electricity prices for seven months, with a reduction in power tariffs for the remaining two months, covering the period from July 2023 to March 2024.
Since the KE’s multi-year tariff is currently under NEPRA’s deliberation, the utility has adopted a proactive approach and filed an FCA based on three scenarios and has requested the approval of any one of the three scenarios for the authority’s consideration and guidance in determining the provisional FCA for above mentioned months to facilitate timely recovery of costs and avoid further accumulation of adjustments to be recovered from customers.
Under the first scenario, KE has proposed that the FCA be calculated as the difference between the actual fuel cost and the reference monthly fuel cost as per the interim tariff, whereas, as per the second scenario, it has been suggested that the difference between the actual and reference monthly fuel cost be considered as per the tariff petition filed by KE and currently under NEPRA’s deliberation.
The third scenario proposes the difference between actual fuel cost vs. annual weighted average fuel reference costs being considered as per the tariff petition filed by KE and currently under NEPRA’s deliberation.
As per details, the power consumers of KE will bear a total of Rs 12.94 per unit hike if the NEPRA approves the first scenario (FCA-Ref Interim Tariff-March 2023), while KE’s consumers will face Rs 18.57/unit increase if the regulatory authority (NEPRA) approves second scenario (FCA-Ref Monthly Cost) and Rs 16.9/unit hike if NEPRA allows third scenario (FCA-Ref Yearly Average Cost) for the period from July 2023 to March 2024.
The NEPRA will hear the plea of K-Electric on May 9 and following the hearing, NEPRA will issue a notification determining how the FCA will be calculated and instructions highlighting the method through which it will be applied to customer bills.
NEPRA, in a public hearing notice, has invited all the interested/affected parties to raise written or oral comments as permissible under the law at the hearing.
Fuel Charge Adjustments (FCA) are incurred by utilities due to global variation in fuel prices used to generate electricity and changes in the generation mix. These costs are passed on to customers following NEPRA’s scrutiny and approval. The request for FCA is due to the utilization of fuel sources based on economic merit order and changes in fuel prices.
FCA – Ref Interim Tariff – March 2023: In this scenario, FCA has been calculated based on a variation of actual monthly cost with respect to the Fuel Cost of March 2023. The reason for using March as a reference is that the tariff of March 2023 has been approved by NEPRA as an interim tariff till the determination of the tariff for the MYT 2024-30. In this scenario, the net amount of FCA for 9 months requested by KE would be PKR 12.94.
FCA – Ref Monthly Cost: In this scenario, FCA has been calculated based on the variation of actual fuel cost with respect to the monthly fuel cost references submitted by KE in its Tariff Petition. The tariff petition is still under the determination of NEPRA, however, this scenario has been included in the FCA calculation for deliberation of Authority so as to avoid piling up of costs to be charged to consumers and impact of working capital on it as once the tariff as per petition is determined by NEPRA, the references in petition will be used for FCA filing. In this scenario, the net FCA for 9 months requested by KE would be PKR 18.55.
FCA – Ref Yearly Avg Cost: In this scenario, FCA has been calculated based on the variation of actual fuel cost with respect to the weighted average of references submitted by KE in its Tariff Petition. This scenario has been included for deliberation of Authority to avoid systematic under/over recovery of costs or additional working capital implications. In this scenario, the net amount of FCA for 9 months requested by KE would be PKR 16.9.
