KE to reimburse Rs2.3 bn to consumers in March, April, May 2021

ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) has issued a notification for K-Electric to reimburse per unit cost of electricity of the last 11 months on account of the monthly fuel cost adjustment (FCA) to power consumers. According to a notification by the regulator, for July 2019 it has been determined to return Rs1.21/unit to power consumers, August 0.7584/unit, September Rs0.3070/unit, October Rs0.1024/unit while regarding November’s FCA K-Electric has been asked to return Rs2.1265/unit and another refund of Rs1.7591/unit for December to the consumers.

For January 2020, it has notified that the utility will collect Rs0.9426/unit, February 0.5093/unit while asked it to return FCA of Rs0.0038/unit of March 2020, 0.7873/unit of April and Rs1.3538/unit of May 2020 to the power consumers.

The authority has decided to implement the decision regarding the FCAs in a period of three months (March, April and May). In March bills, the FCAs for two months of July 2019 and May 2020 will be settled. Since in one month the consumers had to pay to K-Electric while in another month the company had to return to the consumers, so resultantly the K-Electric will payback Rs0.1438/unit to power consumers. In April 2021, the adjustment of August 2019, September, November, February 2020, and April 2020 will be made. So in April 2021, K-Electric will return Rs1.3391/unit to consumers. In May 2021, the company will return Rs0.7179/unit to consumers in their electricity bills as they were charged with higher rates while the cost of fuel was low.

Under the FCA of these 11 months, the utility will pay back Rs2.355 billion to consumers on account of FCA in the billing months of March, April, and May 2021, which shall be applicable to all the consumer categories except for lifeline consumers. Impact of negative FCA shall not be applicable to domestic consumers consuming up-to 300 units and agriculture consumers of K-Electric. K-Electric had requested monthly FCA from July 2019 to May 2020, which had a total negative impact of Rs1.48 billion.

The impact of Fuel Cost Adjustment for the period July 2019 to May 2020, as determined by NEPRA, ranges from an increase of Rs1.2 per unit to a decrease of Rs2.13 per month.

In line with the mechanism given in KE’s Multi-Year Tariff, changes in fuel prices, generation, and power purchase mix are passed through along with certain annual adjustments. Negative adjustment in April to June 2020 is mainly attributable to lower fuel prices, which dropped due to Covid-19, followed by a gradual increase in the second half of the year.

Furnace oil prices dropped from Rs57,000 per metric ton in March 2020 to as low as Rs35,000 per metric ton in May 2020 and then increased to Rs55,000 per metric ton from July to December 2020.

Similarly, RLNG prices dropped from Rs1,800 per MMBtu in March 2020 to Rs1,040 per MMBtu in June 2020, and increased to PKR1,300 per MMBtu in December 2020. It is important to note that KE has already incurred these costs and have paid the costs to fuel suppliers and for external power purchases.

Monthly FCA requests for June 2020 to Dec 2020 amount to Rs3.9 billion, out of which Rs3.2 billion will be passed on to consumers and the remaining will become part of quarterly adjustments as per the given mechanism for T&D losses and non-passing of negative FCA to certain consumer categories. An increase in the FCA amounts mainly relate to GIDC being billed by SSGC (impact around PKR2.9 billion) as well as increase in fuel prices after Covid-19 period and a higher proportion of RLNG being billed due to non-availability of natural gas.