Thursday September 28, 2023

Nepra for offsetting tariff hikes amid economic concerns

Nepra chairman emphasises Power Division is state entity of Pakistan, serves as representative of federal govt

September 12, 2023
The National Electric Power Regulatory Authority (Nepra) headquarters can be seen in this picture released on November 4, 2021. — Facebook/NEPRA
The National Electric Power Regulatory Authority (Nepra) headquarters can be seen in this picture released on November 4, 2021. — Facebook/NEPRA

ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) on Monday urged the federal government to explore ways to offset tariff increases, citing potential negative impacts on industries, jobs, and export earnings that could ultimately bring economic slowdown and low tax collections.

Nepra suggested this during a public hearing it held regarding the federal government’s motion for the recommendation of the consumer-end tariff for K-Electric and the application of a uniform tariff for this Karachi-based utility by way of tariff rationalisation.

Nepra Chairman Waseem Mukhtar headed the proceedings while the authority’s members including Mathar Niaz Rana (member Balochistan), Eng Maqsood Anwar Khan (KP), Ms Amina Ahmed (Punjab) and Rafique Ahmad Shaikh (Sindh) were in presence.

Nepra chairman emphasised that the Power Division is a state entity of Pakistan and serves as a representative of the federal government. “We are concerned about the policy framework and the adverse effects of tariff shocks on the economy.”

According to the motion filed by the federal government, residents of Karachi were to face heightened power rates of over Rs11 per unit (inclusive of all taxes) in the coming months on account of three quarterly adjustments (QTAs) accrued during FY23 and the surcharge.

The regulator reserved the decision. The chairman said that after verification of the data, the authority will issue the final decision in the coming days.

Nepra noted, “If we shift cross-subsidies to the industrial sector, people may lose jobs, export orders and making it difficult to run their businesses. It’s a concern of the regulator. It is bad for the economy.”

Nepra officials have raised significant concerns regarding the government-approved tariff policy. They contend that this policy overlooks critical factors such as tax collection and economic growth, as the increased tariffs have adverse effects on these aspects.

Furthermore, Nepra officials assert that these tariffs have also had a detrimental impact on industrialisation, which in turn affects employment. They pose the question, “If people are not employed, how they will manage to pay their bills.”

The chairman urged the Power Division to relay the regulator’s grave concerns regarding the tariff policy, emphasising its far-reaching consequences affecting the entire nation.

Nepra chairman confronted Power Division officials, disputing their attempt to hold Nepra accountable for tariff increases. He clarified that Nepra determines tariffs in response to motions submitted by the government and pointed out that it is the federal government that decides to raise tariffs.

“In public hearings, we have to strike a balance, the regulator adjudicates and does not increase the tariffs. Can we afford the economy to go down?” Chairman said. “Address these concerns with the federal government and explore strategies to mitigate the rising tariff costs,” remarked the Nepra chairman.

The economy had experienced a slowdown, and the government should assess the repercussions of elevated electricity rates on both the economy and the average citizen. However, Power Division officials contended that certain factors beyond the government’s control, influenced by global circumstances, had impacted the power sector, leading to challenging times.

However, he stated that they are actively considering multiple options while being mindful of potential industry implications. The government is working to address the economic crisis through measures aimed at controlling both dollar rate increases and power theft.

The Chief Financial Officer (CFO) of KE reported that out of 2.8 million residential consumers, approximately 1.2 million paid bills below Rs3,000 per month, while 1.6 million consumers paid bills exceeding Rs3,000. Among the 518,000 commercial consumers, around 60 percent paid bills below Rs6,000.

Nepra chairman instructed the Power Division to collaborate with Nepra’s technical team to verify these figures.

An intervener from the industrial sector noted that the recent tariff hike did not include the impending increase in electricity rates due to fuel adjustment. He highlighted that the base tariff had already risen by approximately Rs8 per unit and the government was seeking an additional increase of over Rs10 per unit, totaling an increase of Rs18 per unit. He expressed concern about the industry’s ability to sustain itself, suggesting that the recent hike could lead to its closure.

An intervener representing the Karachi Chamber of Commerce, voiced strong opposition to a tariff increase, asserting that it would result in the closure of businesses. They emphasised their demand for a forensic audit of KE.

Hafiz Naeem ur Rehman, representing Jamaat-e-Islami, criticised KE’s management, alleging that they had reneged on their promise to provide affordable electricity after the acquisition and failed to fulfill investment commitments. He called for the revocation of KE’s licence and advocated for multiple companies to operate in Karachi.

Furthermore, he suggested that consumers should have the option to access electricity directly from power plants instead of relying on expensive electricity generated by KE.

He leveled accusations against KE employees, describing them as a “mafia” involved in power theft across Karachi, including the operation of 30 illegal PMTs in Surjani town. Despite receiving gas from SSGC and electricity from NTDC, he asserted that consumers were grappling with exorbitant bills.