AHMAD AHMADANI
ISLAMABAD - NEPRA has rejected 20 per cent monthly increase in electricity price sought by the Ministry of Water and Power under the off head ‘fuel adjustment’ thus ending the Ministry’s plans of rubbing more salt on consumers’ wounds in smoke.
While declining to accept the policy decision of Power Ministry, NEPRA in its decision has categorically termed the ministry’s decision as illegal, unrealistic and misleading so is inconsistent with the provisions of NEPRA Act and rules. Consequently, the regulatory authority has torpedoed the desperate plan of the ministry to fetch Rs 325 billion from the hard-pressed consumers already facing long-hour unscheduled loadshedding coupled with sky high prices of electricity in the country.
Sources well aware of the development further informed that the NEPRA though comes under the Cabinet Division, has given a strict decision this time what could be termed in the history of Pakistan by declaring a monthly 20 percent surge under the head fuel adjustment ostensibly as illegitimate, impractical and deceptive sought by the Water and Power Ministry. They further told that the ministry had earlier asked the authority to maintain the reference fuel cost of previous financial year (FY) 2010-11 while determining the fuel cost of the current financial year 2011-12. Ostensibly, in a desperate bid to spare the federal govt from paying extra subsidy of Rs 325 billion which the finance ministry had already declined to provide.
Available copy of NEPRA’s decision with TheNation reveals that the Ministry of Water and Power vide its letter dated 14th November, 2011 requested the Authority to incorporate its business plan for the financial year (FY) 2011-12 while determining the consumer-end tariff of DISCOs (electricity distributing companies of the country) pertaining to the same period.
“According to Water and Power Ministry, this business plan was approved by the government in August 2011 and NEPRA was requested that this decision may be kept in view as a policy decision of the government while determining consumer-end tariff for DISCOs pertaining to the FY 2011-12”, the NEPRA decision reads, adding, “In view of the above legal position, the authority is constrained not to accept the above policy decision of the ministry being inconsistent with the provisions of NEPRA Act and Rules made there under.”
The authority has considered the above mentioned policy decision of the Power Ministry in the light of provisions of NEPRA act and rules. The authority considered that the policy decision was not consistent with the provisions of NEPRA act.
Further, NEPRA having the prime responsibility of protecting the rights of consumers could not maintain the reference fuel cost of previous financial year while setting the reference fuel cost of current financial year because reference fuel cost of previous financial year will rub Rs 325 billion salt on the wounds of poor consumers.
The authority has further noted that the furnace oil prices assumed in the said business plan is Rs 46,000/metric tons, which is not realistic. Moreover, no generation on HSD (high speed diesel) fuel in the above business plan has been projected. The factual position is that the RFO (residual fuel oil) prices over the last year have shown an increasing trend and the average RFO prices from July 2011 to December 2011 were around Rs 66,000 (excluding Sales Tax) per metric ton. Furthermore, the international market does not only affect the RFO prices in Pakistan but also by the Pak rupee devaluation.
While making assessment for generation cost for the FY 2011-12, NEPRA has assumed RFO prices in the range of Rs 66,723 per metric ton to Rs 63,000 per metric ton (excluding Sales Tax) after incorporating the possible determinants of RFO prices.
Unlike FY 2010-11, during the FY 2011-12, approximately 2.00 per cent generation is expected to be generated on HSD due to the ongoing shortage of gas supply which has not been accounted for by the ministry in its above business plan. The aforementioned generation on HSD is assumed by NEPRA in the light of ECC decision in the matter of Sapphire, Halmore, Orient and Saif whereby one turbine of these plants would run on HSD throughout the year. For the FY 2011-12, the HSD prices are being assumed within the range of Rs 88.23 per liter to Rs 83.18 per liter (excluding Sales Tax).
“In view thereof, accepting the aforementioned business plan being based on unrealistic assumptions would not only be misleading but will also be inconsistent with the provisions of Rule 17(3) of NEPRA Tariff Standards and Procedure Rules 1998,” the NEPRA decision reads.
The sources in Water and Power Ministry also told that the federal government had allocated Rs 50 billion as a subsidy for the power sector in the current financial year (FY 2011-12) budget. However, due to surge in generation cost of electricity, it would be impossible to maintain subsidy at Rs 50 billion. Similarly, viewing the political and legal problems, the ministry is so far unable to make electricity more expensive.