Nepra okays additional surcharge of Rs3.39/unit

KARACHI: The National Electric Power Regulatory Authority (Nepra) on Monday approved the imposition of an additional surcharge of Rs3.39 per unit on the power consumers of all power distribution companies (DISCOs), including K-Electric.

Nepra decided on the application of the federal government, seeking to jack up the surcharge by Rs3.39 per unit, which will be collected from the power consumers from March to June 2023.

Currently, the power consumers are paying a 43 paisa per unit surcharge, while the total surcharge to be paid by the power consumers will be Rs 3.82/unit with effect from the recent Nepra approval. However, this surcharge will stand at only Rs 1.43/unit during the next financial year. Earlier on March 2 (Thursday), 2023, Nepra had raised serious questions over the federal government’s request for the imposition of an additional surcharge of Rs 3.39 per unit on the power consumers.

Nepra had 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 per unit on the electricity consumers.

During the hearing, Nepra had said that the regulator was not sure whether the unprecedented increase in consumer pricing was within its domain or not and had sought a legal opinion on the matter. Nepra officials had said that already 0.43 paisa per unit was being charged from consumers, and now the government wanted to increase it to Rs3.82 per unit.

The additional surcharge of Rs 3.39/unit is to be applied to 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 already applicable FC surcharge of 0.43 paisa per unit for the current financial year. After four months, the additional surcharge of Rs 3.39 per unit is expected to be reduced to Re 1 per 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 an additional surcharge on the electricity tariff will enable the government to pay off the interest on the loans of PHL, valued at Rs 120 billion. With the application of an additional surcharge, the total surcharge will peak at Rs 3.82/unit for the four months (Mar-June).

The current surcharge being paid by power consumers at a rate of 0.43 paisa per unit is earmarked to clear an interest amount of Rs 44 billion accrued on loans from the PHL. Out of the total outstanding finance facilities of Rs. 800.253 billion as of June 30, 2022, servicing of loans or interest charges amounts to Rs. 246.384 billion.

It is pegged to be paid back through the imposition of a Financing Cost surcharge at a rate of 0.43 paisa per unit. This surcharge is not sufficient to cover markup charges on total PHL loans. The markup on remaining loans is being paid from revenue collected through electricity sales, and this constrains the payments of other financial obligations.

To summarise, the total surcharge becomes Rs 3.82/unit for the said period, and for the new financial year, an additional surcharge of Rs 3.39/unit will be reduced to Re 1/unit to cover the additional markup charges of PHL loans, which cannot be covered through the already applicable FC surcharge of 0.43 paisa per unit.

This would yield a total surcharge of Rs. 1.43/unit for the new financial year. The Nepra chairman, who had presided over the proceedings, asked whether the authority could reject this proposed imposition of the surcharge, to which officials from the Power Division replied: “Yes, it can”. The chairman had said that the regulator had strong reservations about the imposition of this surcharge, as those who were loyal consumers and regularly paid their bills were to pay Rs3.39/unit surcharge, while those who did not pay their bills were rejoicing. “The authority is neither accepting nor rejecting this surcharge and has 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 a surcharge,” he said.

The chairman had said that if Nepra allowed recoveries in this way, then other procedures would 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 gets worse. “Nepra member Rafique Ahmad Shaikh had asked the division to do its homework on the issue, take legal views regarding the surcharges, and then come to us. He said that the surcharge will not solve the issues facing the government. He had said that the industrial tariff could go up to Rs 32/unit. Followed by the 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 had not looked into this question so far.