LAHORE - The government has decided to allow 7 per cent increase, to be announced by July this year, in the current electricity tariff for all except certain consumers, it is learnt. The ministry had earlier given assurance to the PEPCO with respect to hike in the context of plea put forward by all eight electricity distribution companies (DISCOs) of Pakistan Electric Power Company (PEPCO), demanding the 23 per cent increase in the existing electricity tariff, the PEPCO sources said. The DISCOs had submitted plea in May this year for increase in their tariff, stressing that the 10 per cent increase was not enough as of now after the steep increase in the fuel prices to meet the financial shortfall. The federal government had allowed DISCOs to raise power tariff by 10 per cent on February 24 last against the demand of 33 per cent increase, which was made applicable from the month of February. The sources concerned said that the companies accepted the notified tariff but decided to file review petitions to plead for the additional raise. The decision of the Authority in the consumer-end tariff for the DISCOs pointed out. As per the sources, the furnace oil and gas prices have increased by 54 per cent besides substantial hike in electricity demand particularly from the middle-income consumers, as well as, rural electrification, but they somehow are paying much more price as compared to the cost of service being provided to them. While the sources confirmed that the authority did receive the DISCOs' review petitions. NEPRA officials, however, expressed ignorance about it. They said that NEPRA had worked out DISCOs tariff on the basis of O&M costs (indigenous and foreign) and return on equity. The Authority determined in March last year in respect of biannual adjustment in power purchase price for the distribution companies, adjusting the consumer end tariff 'subsequent to change power purchase price of the 1st half of fiscal 2007-2008'. It is learnt that PEPCO is still facing Rs 38 billion cash shortfall and finding it hard to make payment to the Independent Power Producers (IPPs) from whom it purchases power. The NEPRA has determined the tariff in the light of the World Bank's proposed differential tariff formula. However, the government will have to extend a subsidy of Rs 21-22 billion irrespective of the fact whether the consumers live within the jurisdiction of financially weak DISCO like Hyderabad Electric Supply Company (HESCO) or financially healthy like Islamabad Electric Supply Company (IESCO). It is stated that the NEPRA had determined differential tariff for all the DISCOs but the government approved Rs 22 billion subsidy to keep it comparable for consumers. They said that the Ministry of Water and Power had provided the notifications about new tariff to the World Bank but did not give any details about the reaction of the bank. Afzal Bajwa from Islamabad adds: Masses, already hard pressed under the ever increasing pressures of the price-hike, are to face another blow of over 29 per cent increase in the tariff of natural gas as recommended by the Oil and Gas Regulatory Authority (OGRA) for the year started July 1. The Oil and Gas Regulatory Authority, in its separate determinations for the state-owned utility companies namely the SSGC and the SNGPL, has prescribed the price increase of 31 per cent and 28 per cent respectively. The final decision, however, lies with the government that is most likely to decide in the cabinet's special meeting on June 11, the day of budget presentation to the National Assembly. "Increase in the prices is determined at 31 per cent in the case of domestic tariff to keep it uniform with Sui Northern Gas Pipelines Limited and at 28 per cent in remaining categories of consumers except feed-stock gas supply to the fertilizer consumer, who is governed by separate GoP policy," reads the OGRA decision on SSGC petition for increase in prices. "Increase of 28 per cent (Rs 58.97 per MMBTU) in the petitioner's average prescribed prices has been adjusted in all categories of consumers excluding fertilizer-feed," the OGRA stated in its decision on the provisional prescribed tariff for the SNGPL. The prescribed prices for various categories of retail consumers determined by the Authority on provisional basis shall be subject to adjustment upon receipt of Federal Government advice under Section 8(3) of the Ordinance, with respect to the sale price of gas for each category of retail consumers provided that the overall increase in the average prescribed price remains unchanged so that the petitioner is able to achieve its total revenue requirements in accordance with Section 8(6)(f) of the Ordinance, it added. While determining the increase in prices for the two companies, the OGRA has directed them to ensure prudence and ring fencing of all capital and revenue expenditures, including all cost allocations with respect to each Air-Mix LPG, CNG or LNG based pipeline distribution projects. It has also required the two utilities to submit a review petition to the Authority latest by October 15, 2008 for review of its estimated revenue requirements as required under Section 8(2) of the Ordinance, keeping in view the actual and anticipated changes in international prices of crude and fuel oil during the period June to November, 2008. Contrary to the market based principles of the government towards liberalizing the Oil and Gas sector, the two state-owned utilities have continued to enjoy fixed rate of return above 17 per cent per annum irrespective of their efficiency and business prudence. Similarly, frequent directions by the OGRA regarding the unaccounted for gas (UFG) have been hardly bothered about the two companies. Consequently, UFG rate has gone beyond seven per cent rising from the previous level of 6.5 per cent.