Nepra issues guidelines for determination of consumer-end tariff

KARACHI: The National Electric Power Regulatory Authority (Nepra) has warned the distribution companies that imprudent investment would not be included in their revenue requirement, according to the guidelines for determination of consumer-end tariff issued by the power authority on Wednesday.
Determination of a multiyear or annual electricity end-user tariff is based on the revenue requirement for the distribution company (Disco), it said.
Imprudent investment may arise after considering the actual results of investment carried out by a distribution company under an already approved investment plan by the authority.
Nepra has clarified the purpose of the investment would be questioned only when the investment plan is approved under a separate proceeding. During the processing of the tariff determination, the operational execution of the same approved plan may render any investment imprudent.
Nepra will approve an investment plan for the expansion of operations, assets and facilities in order to improve the efficiency and performance of the distribution companies, while annual investment plans will be reviewed by the authority for the purpose of determining allowances or disallowances in the determination of the revenue requirement.
According to the guidelines, only assessed level of technical losses, as determined by National Electric Power Regulatory Authority, will be included in the revenue requirement of a distribution company for either an annual or multiyear tariff, while the cost of non-technical losses may or may not be included in an expense account on a case-to-case basis.
The power authority has advised the tariff petition submitted by the distribution company will contain a request for revenue to fully recover the legitimate costs of delivering electricity with the performance standards and quality established by the authority to the end-users.
The National Electric Power Regulatory Authority has the authority to reject the requested revenue requirement in its entirety and require the resubmission of the requisite information, while it does not guarantee the recovery of the approved revenue requirement, and it only provides the distribution company with the opportunity to recover the approved revenue requirement via the application of the determined tariff.
Based on the legal framework and Nepra Tariff Standard and Procedure Rules, 1998, the distribution licensee files a tariff petition and National Electric Power Regulatory Authority determines the consumer-end tariff of each distribution licensee by assessing different components of its revenue requirement, eg, projected power purchase price, distribution margin and prior period adjustment.
The tariff of the distribution company is its distribution margin yet the fact would remain that besides that margin, the generation cost of the generation companies, as well as the wheeling charges for transmission company are also recovered in the bills generated by the distribution companies.