Power consumers may get another jolt as Nepra hints at Rs2.31 per unit hike

• Discos aim to amass Rs146 billion through QTA mechanism.
• Discos initially proposed Rs5.41 hike for three months.
• Disco drawing 600 to 700MW less due to diminished demand.

ISLAMABAD: At the request of Power Division, the National Electric Power Regulatory Authority (Nepra) has hinted at granting approval to distribution companies (Discos) to levy extra charges of Rs2.31 per unit on consumers for six months starting October 2023, The News reported Thursday.

Discos aim to amass Rs146 billion for the fourth quarter of FY2023 through the quarterly tariff adjustment (QTA) mechanism by imposing the additional charges.

Nepra on Wednesday conducted a public hearing in response to the power distribution companies' request seeking a hike in electricity prices. 

Nepra Chairman Waseem Mukhtar chaired the proceedings along with four other authority members.

Discos had initially proposed a Rs5.41 per unit hike from October to December 2023. However, due to concerns about public affordability and a potential reduction in Discos’ revenue recovery, the Power Division requested the authority to extend the recovery period to six months at a rate of Rs2.31 per unit.

Nevertheless, the power regulator asked for a written assurance from the Power Division that the impact on cash flow will not be transferred to consumers. The decision to expand the recovery duration to six months, instead of three, may potentially decrease cash flow for Discos.

During the hearing, it came to light that the surging electricity rates had led industrial consumers to shutter their businesses, resulting in a substantial drop in demand for power distribution companies.

Notably, Tesco's drawl reduced by 41%, Hesco by 19%, Pesco by 16%, Sepco by 15%, and both Gepco and Iesco by 14% each, during the April-June 2023 quarter. Qesco's drawl was also reduced by 13%, Mepco's by 12% and Lesco and Fesco by 10% each during the quarter.

Expressing serious concerns, the power regulator highlighted the inability of chief executive officers (CEOs) of the distribution companies to provide satisfactory explanation for the low electricity utilisation.

Furthermore, it was revealed that each Disco was drawing 600 to 700MW less electricity from the system due to diminished demand. Meanwhile, a backlog of 350,000 connection cases was reported. The regulator demanded an explanation for the low electricity sales during the review period.

"We cannot simply accept the figures you are presenting," Nepra officials remarked. They added that the situation could adversely affect the Discos' cash flow and contribute to circular debt. The regulator also noted that the exchange rate had been pegged at Rs286.

"Efficiency must not be sacrificed, and inefficiency, overbilling, and the cost of mismanagement should not be borne by consumers," Nepra observed. The officials from Nepra stated that the provincialisation of Discos was not a viable solution and that structural reforms were necessary to effect improvements in the power sector.

The Central Power Purchasing Agency, representing XWDISCOs, has requested the amount as part of the third QTA of FY2022-23.

Of the total additional amount of Rs144.69 billion, consumers are expected to contribute Rs122.4 billion for capacity charges. This amount will be allocated to Independent Power Producers (IPPs) to compensate for the cost of electricity that power distribution companies could not supply to meet national demand due to system constraints or low electricity demand.