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November 24, 2017

Power consumers fleeced of Rs277 billion

National

November 24, 2017

ISLAMABAD: As much as Rs277 billion has been fleeced from the electricity consumers as net hydel profit on just two hydropower stations – Tarbela and Ghazi Barotha hydropower projects – and the said huge amount is used for subsidising the expensive power plants, reveals the Additional Note written by Member Tariff in Nepra Himayatullah Khan in the determination on bulk supply tariff for Wapda hydel for financial year 2017-18.

Khan in the determination, while giving his input on the question as to whether NHP related to provinces should be passed to consumers through the tariff, said that under the interim arrangement, of fixed NHP @ Rs1.10 per unit indexed at 5 percent per annum, there is no other option but to pass on the amount to end consumers.

However, having said that, it is important to point out that the end consumers are already paying Net Hydel Profit in the monthly bills. This amount is collected by the DISCOs and passed on to CPPA-G from where it is diverted towards payment to expensive power stations.

In his note, Mr Khan argued saying NHP can be defined as, the difference between the sale price ( the price which the consumer pays) and the generation cost of a unit of electricity, produced by a particular hydel station. Note says: "If we take the case of Tarbela and Ghazi Barotha Hydro Power Project (GBHPP), a unit of electricity is generated at approximately Rs0.64 per unit and Rs1.85 per unit respectively, while the consumer actually pays © Rs11.45 per unit, yielding Rs10.81 per unit and Rs9.60 per unit as net profit, for each station. If we take roughly 15,000 GWh produced by Tarbela and 6808 GWh by GBHPP, during 2016-17, the consumer has already paid into the system approximately Rs227 billion as NHP, on these two stations alone.” However, the note unfolds that instead of this amount being paid to the provinces as NHP, it is being diverted towards subsidizing the power sector. This amount goes towards payments to expensive power generating units, such as, Wind (Rs. 22 per unit), Solar (Rs. 20per unit), Bagasse (Rs. 13 per unit), IPP (HSD Rs. 22 per unit) and public sector GENCOs, at the expense of the provinces.

The Note argues on the issue whether Wapda is deviating from Kazi Formula while making payment to provinces on account of NHP without sanction of the CCI saying that the existing tariff methodology is not justified on two counts: Firstly, it precludes determination of Net Hydel Profit (NHP) in accordance with Article 161(2) and its Explanation of Constitution of Pakistan, 1973. It also does not allow computation of NHP on the basis of Kazi Committee Methodology (KCM) which was duly approved by the Council of Common Interests (CCI) in its meeting dated 12th January, 1991 and reiterated in its meetings dated 12.09.1993, 25.05.1997 and 22.12.1998.

Secondly, it is an annual and a cost-plus based methodology rather than a multiyear revenue-minus cost based methodology. This methodology denies Wapda the requisite space and freedom to fully finance its investment and operation & maintenance requirements.

On a question as to whether there should be one bulk license and tariff for Wapda Hydroelectrics, 19 operating Hydel stations and 5 upcoming Hydel projects or 24 individual licenses and tariffs, Mr Khan in his note said, Nepra is


To be continued