NEPRA slaps additional surcharge of Rs3.39 per unit on consumers

ISLAMABAD: National Electric Power Regulatory Authority (NEPRA) on Monday approved the imposition of additional surcharge of Rs 3.39 per unit on the power consumers of the all power distribution companies (DISCOs) including the K-Electric.

As per details, NEPRA has taken decision over the application submitted by the federal government, seeking to jack up the surcharge by Rs 3.39/unit which will be collected from the power consumers during March to June 2023.

Currently the power consumers are paying 43 paisa/unit surcharge while total surcharge to be paid by the power consumers will be Rs 3.82/unit with effect to recent NEPRA’s approval. However, this surcharge will stand at only Rs 1.43/unit during the next financial year.

Earlier on 2nd March (Thursday) 2023, NEPRA raised serious questions over the federal government’s request for imposition of additional surcharge of Rs 3.39 per unit on the power consumers of the country.

NEPRA held public hearings under the chair Tauseef H. Farooqi on the federal government’s motion seeking the regulator’s approval for putting the burden of an additional surcharge of Rs3.39/unit on the electricity consumers.

According to sources, applying this surcharge to the bills of the consumers will allow the government a collection of an additional Rs 76 billion from March to June of the current year.

During the course of hearing, NEPRA said that the regulator is not clear whether the unprecedented increase in consumer pricing is within their domain or not and has sought legal opinion on the matter.

The NEPRA officials said that already, Rs 0.43/unit is being charged to consumers and now the government wants to increase it to Rs 3.82/unit.

The additional surcharge of Rs 3.39/unit is to be applied in the billing of consumers from March to June 2023, to cover the markup charges of Power Holdings Limited (PHL) loans which are not covered through the current applicable financing cost (FC) surcharge of Rs 0.43/unit for the current financial year.

After four months the additional surcharge of Rs 3.39/unit is expected to be reduced to Rs 1/unit to cover the markup charges of PHL; the total surcharge would then become Rs 1.43/unit for the new financial year.

The levying of additional surcharge in electricity tariff will enable the government to pay off interest on the loans of PHL valued at Rs 120 billion.

With the application of additional surcharge, the total surcharge will peak at Rs3.82/unit for the four months (Mar-June).The current surcharge being paid by power consumers at a rate of Rs 0.43/unit is earmarked to clear an interest amount of Rs 44 billion accrued on loans of the PHL.

Out of the total outstanding finance facilities of Rs 800 billion, as of June 30,2022, servicing of loans or interest charges amount to Rs 246 billion.

It is pegged to be paid back through imposition of the FC surcharge at a rate of Rs. 0.43/unit.  This surcharge is not sufficient to cover markup charges of total PHL loans.

The mark up of remaining loans is being paid from revenue collected through electricity sales and this constrains the payments of other financial obligations.

To summarise it all the total surcharge becomes Rs 3.82/unit for the said period and for new financial year, additional surcharge of Rs. 3.39/unit will be reduced to Rs. 1/unit to cover the additional markup charges of PHL loans which cannot be covered through the already applicable FC surcharge of 0.43/unit. This would yield a total surcharge of Rs. 1.43/unit for the new financial year.

Chairman NEPRA who presided over the proceedings asked whether the NEPRA can reject this proposed imposition of the surcharge to which officials from the Power Division replied “yes, it can”.

The chairman said that the regulator has strong reservations about the imposition of this surcharge, as those who are loyal consumers and regularly pay their bills are to pay Rs 3.39/unit surcharge, while those who do not pay their bills are rejoicing.

The authority is neither accepting or rejecting this surcharge and linked it with the legal opinions and asked the Power Division to take legal views on it and then come to us. “We need the legal position of the government regarding the imposition of surcharge,” he said.

Chairman said that if NEPRA allows recoveries in this way, then other procedures will become redundant. If the government has the authority, then it should not shift the responsibility onto NEPRA.

This situation did not emerge in one day, we had several times forewarned the government of deteriorating power management, but no heed was given. It indicates the inefficiencies of the Power Division due to which every year the situation becomes bad to worse.

Member NEPRA Rafique Ahmad Shaikh asked the division to do its homework on the issue, take legal views regarding the surcharges and then come to us. He further said that the surcharge will not solve the issues of the government.

He said that the industrial tariff could go up to Rs 32/unit. Followed by a question “if industries opt for an alternate option, then how can the government recover?”. Ironically, the power division official had no answer and said that we have not looked into this question so far.

Chairman NEPRA said that our energy sector governance and recoveries are not settled while challenges of losses are increasing. We are pressing on the subsidy’s surcharges, but are not willing to address the actual issues.