Blow to consumers as Discos seek Rs7.131/unit hike for March

ISLAMABAD: Power consumers in Pakistan are to brace for a substantial increase in their electricity bills in March 2024, with ex-Wapda distribution companies (XWDiscos) seeking approval from the National Electric Power Regulatory Authority (NEPRA) for a staggering Rs7.131 per unit hike. This hike is attributed to the fuel charges adjustment (FCA) for January 2024.

They have sought the surge in tariff amidst a notable decline in hydroelectric generation and systemic limitations such as the High Voltage Direct Current (HVDC) transmission line’s inability to efficiently transport cost-effective power from southern generators to the north, thereby placing a significant financial strain on consumers.

As a consequence, less cost-effective sources have been utilised for electricity generation in the south, resorting to expensive alternatives like high-speed diesel and Residual Fuel Oil (RFO). The rise in fuel costs is also one of the instrumentals for these high prices.

Nepra has scheduled a public hearing on February 23 to review this petition of Central Power Purchasing Agency (CPPA) that it has submitted on behalf of Discos. Notably, of the total demand, these companies also claimed a recovery of Rs2.568 billion from previous adjustments. The petition indicates that a total of 8,314 gigawatt-hours (GWh) of electricity was generated in January 2024, with an associated cost of Rs114.634 billion (equivalent to Rs13.7885 per unit). Moreover, 7,938 GWh, originally priced at Rs116.06 billion, was delivered to distribution companies (Discos), while transmission losses stood at 4.24 percent (or 352 GWh) of the total generation. Whereas, last month (Dec 2023), it was 3.51pc (271GWh) and in January 2023, it was also 3.51 percent (or 298GWh).

Power generation in January 2024 dropped by 2.4 percent against the same month’s generation of 8,515 GWh in the previous year. However, over the previous month (December 2023), the generation increased by 7.6 percent. Interestingly, during the month, actual power generation was notably 4.7 percent lower than the reference generation. This decrease in generation is anticipated to lead to increased capacity charges for the third quarter of fiscal year 2024 QTA (Quarterly Tariff Adjustment).

According to the petition the generation cost increased by a worrisome 43.9 percent to Rs13.79 per unit YoY in January 2024 from Rs11.2 per unit in December 2023. Similarly, over the previous month (Dec 2023, unit cost of Rs 10.13), increased by 41.3 percent. The per-unit power generation cost from imported coal surged by 22 percent in January 2024 to Rs21.05/unit from Rs17.25/unit in the previous month. The local cola generation cost however fell by 3.3 percent to Rs11.9/unit from Rs12.33/unit in December 2023.

The expensive generation was made from RFO and diesel. During the month, RFO-based generation was 750 GWh which was 62 percent more than the same month of last year and 346 percent over the previous month (168GWh). Its per unit generation cost was 35.44/unit which was 22.3 percent more expensive than the same month of the previous year. Generation from HSD was 102 GWh at Rs45.61/unit, while in the previous month, this expensive source was not used for power generation however, only 5.4 GWh was generated in the same month of last year.

The petition outlines that in January, the consumers were charged a reference fuel cost of Rs7.4894 per unit, while the actual fuel cost incurred was Rs14.6202 per unit. The CPPA argues that the additional cost burden of Rs7.1308 per unit should be transferred to consumers.