Billions being minted by misuse of monthly fuel adjustment

ISLAMABAD: The electricity distribution companies (Discos) are found to have been making huge illegal profits in billions of rupees at the cost of inordinate delay in providing relief to the electricity consumers under the monthly fuel adjustment mechanism.
To this effect the National Electric Power Regulatory Authority (Nepra) has issued a show cause notice to the state-owned company, the senior official privy to this development told The News.
The distribution companies have been pocketing unjustified profits every month since April, 2015 until now that run into billions of rupees under the garb of monthly fuel adjustment. As per Nepra Act, the additional amount that was taken from consumers in the month of April this year in the wake of higher reference fuel price set by Nepra was to be adjusted in the billings of May, but it did not happen, rather the amount was given back to the consumers in the electricity bills during the month of August.
Under the monthly fuel mechanism, the fuel is a pass through item and the cost of fuel has to be paid by the end consumers. And in case the fuel cost tumbles, the required relief in this head is passed on to the consumers in next month’s bills.
However, the ground realty always bites as the additional amount of Rs22 billion was taken from the consumers in the month of May, which was illegally adjusted in the month of September as the adjustment was due in the month of June. However, in the month of June, the consumers were again charged with additional amount of Rs25 billion which was again adjusted in the month August instead of July, 2015.
Similarly, in the month of July, the amount of Rs20 billion was charged from the consumers, but the said amount was reverted back to the consumers in October instead of month of August.
The story does not end here rather in the month of August, the additional amount of Rs26 billion was also charged which will now be given back to the consumers in the month of December instead of being paid back in the month September. This is how the disruption companies continue to earn the profit by keeping the amount of the consumers in the banks which are paid back to the end consumers after the lapse of 2-3 months period.
Legal experts in the regulator raised this issue in written shape, but the Authority responded saying if the distribution companies are making profit on the consumers’ amount, it doesn’t matter. Nepra is of the view that the regulator had adjusted the profits while determining the annual tariff of distribution companies which is illegal as clause 31 of Nepra Act clearly says that fluctuations in the fuel cost will be passed on to the consumers in every month.
The electricity consumers are factually facing huge loss because of the high fuel reference price set by Nepra for 2014-15 which stood at Rs65,000 per ton whereas the factual fuel price had been hovering between Rs30,000 to Rs35,000 per ton in the last 11 months. Nepra possess the power to re-fix the reference fuel price for current financial year.
According to the well placed official sources, Nepra has been advised by the finance and water and power ministries not to pass on relief to consumers in the head of monthly fuel adjustment till January next year.