The National Electric Power Regulatory Authority (Nepra) has allowed K-Electric an increase of Rs4.8269 per unit in power tariff for March 2022 on account of fuel cost adjustment.
The increase in tariff will put a burden of Rs7.86 billion on the power consumers in Karachi. The company will recover the tariff adjustment in the electricity bills of June 2022.
Earlier, K-Electric requested fuel cost adjustment of Rs5.275 per kilowatt-hour (kWh) with a total impact of Rs8.59 billion.
The power sector regulator conducted a public hearing on April 27 on the petition filed by the private power utility.
In a statement, Nepra said that it had approved a fuel cost adjustment of Rs4.8269 per unit for March 2022, which would have a cumulative impact of Rs7.86 billion and would be recovered in the bills of June 2022.
The fuel cost adjustment will be applicable to all consumer categories except for lifeline consumers.
K-Electric made the tariff increase request in the backdrop of rising costs of furnace oil and re-gasified liquefied natural gas (RLNG), which increased 10% and 40% respectively from December 2021 to March 2022.
Alongside the rise in fuel costs, the cost of energy purchased from the Central Power Purchasing Agency-Guarantee (CPPA-G) went up 9% during the four-month period.
The fuel cost of utilities varies due to the global variation in prices of fuel used to generate electricity and the change in power generation mix. These costs are passed on to the consumers following Nepra’s examination and approval.
On the other hand, the consumers receive the benefit when fuel prices decrease in the global market.
During the hearing, K-Electric pointed out that at the time of submission of its fuel cost adjustment request, the regulator’s approved fuel rate for ex-Wapda distribution companies for March 2022 was not available. Therefore, K-Electric used the fuel cost rate of CPPA-G for the month.
Thus, the amount claimed on account of energy purchased from CPPA-G was subject to adjustment based on the fuel cost decision of the regulator in the case of distribution companies.
Nepra noted that a power purchase agreement was signed between National Transmission and Despatch Company (NTDC) and K-Electric on January 26, 2010 for five years for the sale and purchase of 650 megawatts at basket rates.
Subsequently, the Council of Common Interests (CCI) made a decision in its meeting held on November 8, 2012 with respect to the modalities for the withdrawal of electric power from NTDC by the petitioner, wherein it was decided to reduce the supply of energy by 300MW.
However, the CCI decision was impugned through the suits/ petitions by K-Electric in the Sindh High Court.
No new agreement has been signed between K-Electric and NTDC so far, and K-Electric is continuing to draw energy from the national grid, which at present stands at around 1,100MW.
A representative of the Karachi Chamber of Commerce and Industry (KCCI) argued that the high fuel cost adjustment had a detrimental impact on the industrial consumers of K-Electric.
An intervener, Arif Bilwani, submitted that many plants owned by K-Electric were being run on the old provisional heat rates, which needed to be updated.
He emphasised that the power utility should buy more electricity from CPPA-G, which was cheaper than its own generation.
Published in The Express Tribune, May 28th, 2022.
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