Consumers lash out at Nepra over overbilling, outages

Recent hike in base tariff will increase effective price to up to Rs77.15 per unit from July 1, 2024

ISLAMABAD   -   The electricity consumers have grilled NEPRA over its failure to protect consumers’ interests, control tariff hike, overbilling and abnormal loadshedding as the regulator was informed by the government that the recent hike in base tariff will increase the effective price to up to Rs 77.15 per unit from July 1,2024.

In a public hearing on the federal government motion, NEPRA has announced that on the complaints of slab changes through overbilling by the power distribution companies, the regulator has initiated investigations. Within next few days, the outcome of the probe in the matter of overbilling will be shared with public, the regulator announced. The regulator was informed that the total subsidies of Rs 730 billion, including cross and budgeted subsidies, will be provided for various categories of consumers to protect them from excessive tariff hike. Of Rs730 billion, Rs 490 billion will paid by the federal government while the remaining is cross subsidies, the official informed.

It was further informed that out of the federal government funded Rs 490 billion K-Electric will receive a subsidy of Rs177 billion, while DISCOs will be given Rs313 billion. The intervenor came hard on the regulator over its poor performance and playing a B team of the government. “What is the justification of the NEPRA existing if it is acting as a rubber stamp for validating all the demands of the federal government,” an intervener asked.

The authority members were also very aggressive to the public outrage in the hearing and were of the opinion that they have no control over 90 percent assumptions for the base tariff hike. When you don’t have control over 90 percent assumption then what was the justification for your existence? the intervenor argued. Another intervenor asked about the prolonged AT&C loadshedding in the country and regulator failure to restrain the distribution companies. Member NEPRA, Sindh said that they imposed fine on the Discos for AT&C losses but they had got stay orders against the decisions.

Similarly, he said that the claims of majority of consumers in the matter of last year’s overbilling have been resolved and they have been compensated. Official of the Power Division informed the hearing that the highest increase of Rs8.04/unit was approved by the federal cabinet for commercial consumers of the country which will take its tariff to Rs 77.15/unit. The regulator was also informed that the federal government has decided not to increase the electricity rates for domestic consumers using up to 200 units per month. It was informed by Power Division that against the NEPRA approved average base tariff hike of Rs5.72/unit for FY2024-25, the federal cabinet has approved an average hike of Rs 3.29/unit from July to September 2024, while from October to June 2025 it will be enhanced by Rs 4.55/unit.

For residential consumers, the NEPRA had approved Rs 9.18 per unit hike in average tariff, however the federal cabinet has approved Rs 3.23 per unit from July to September 2024, while Rs 6.27 per unit from October to June 2025, the official informed. Similarly, for commercial consumers NEPRA has approved an increase of Rs 8.96/unit in average tariff, however the government has proposed Rs 8.04/unit. For general services NEPRA approved average Rs 6.20/unit, the federal cabinet had approved Rs 6.98/unit. For industrial consumers NEPRA had approved a decrease of Re0.68/unit in tariff, however the federal government maintained the existing tariff. For the bulk supply against the NEPRA determined Rs 5.87/unit hike in base tariff, the cabinet had approved Rs 5.51/unit increase. For agriculture sector, the federal cabinet had approved a hike of Rs 6.62/unit in tariff against the NEPRA determined Rs 6.53/unit.

The current fiscal year will see capacity payments amounting to Rs 2.16 trillion. The determination of the electricity tariff for the ongoing fiscal year is based on the sale of 106 billion units of electricity annually against the sale units of 95 units during the previous fiscal year, Power Division officials noted during the briefing. consumers voiced their dissatisfaction during the hearing on the increase in electricity tariffs and failure of NEPRA on protecting the consumers’ interests. The Central Power Purchasing Agency (CPPA) while justifying the payment of 2.16 trillion rupees in capacity payments said that annual capacity payments within the power sector are not unusual.

NEPRA chairman expressed concerns over the lack of accountability in the power sector, highlighting that those who pay their bills are not protected while electricity theft continues unchecked. He also noted the lack of improvement in the recovery rates of electricity companies over the past few years. “The lack of improvement in recovery rates over the years is concerning. Will increasing electricity prices lead to better recovery rates?” the chairman questioned, emphasizing the need for a system of rewards and punishments within the electricity companies. NEPRA member Mathar Niaz Rana pointed out the significant challenges in the electricity generation sector, referring to it as the “elephant in the room.” He questioned whether the issues within the generation sector have been adequately addressed.

Furthermore, NEPRA member Sindh indicated that companies have been fined for loadshedding based on losses. NEPRA has reserved its decision on the uniform basic tariff, which will be announced later. The federal government has requested an increase in average base tariff starting July 1. NEPRA has reserved its decision on the government’s request to increase the electricity tariff by up to Rs 8.04 per unit starting from July.

The Power Division announced a relief package for domestic consumers using up to 200 units per month, effective for three months starting July 2024. This relief will benefit 83 percent of the country’s domestic consumers. The average basic tariff will see an increase of Rs3.29 per unit from July to September, and Rs4.55 per unit from October onwards. Power Division officials revealed that the electricity price determination was based on an exchange rate of Rs300 per dollar. Capacity payments have seen an increase of 38 paisas per unit compared to last year. The federal government is set to provide a total subsidy of Rs490 billion to electricity consumers this fiscal year, benefiting 86 percent of them with relief ranging from Rs4 to Rs7 per unit. Consequently, the average basic tariff will see an increase of Rs3.29 per unit from July to September, and Rs4.55 per unit from October onwards. Specifically, K-Electric will receive Rs177 billion, and DISCOs will get Rs313 billion. Additionally, DISCOs’ consumers will receive a cross-subsidy of Rs730 billion. NEPRA chairman expressed confusion over the tariff increases, questioning how the overall cost appears to be decreasing despite the proposed hikes. Power Division officials assured that the adjustments for the month of June would end in July, leading to potentially lower bills for consumers compared to June. They emphasized that the proposed changes are merely tariff re-settings and not significant hikes. The Power Division reassured that the common man would not experience a substantial increase in bills. “We guarantee that there will be no significant rise,” they stated, adding that with the end of adjustments, the overall electricity bills for consumers will decrease further.

Power Division officials disclosed that the burden of Rs. 155 billion has been lifted from the industrial sector. They highlighted that the tariff for Pakistan’s industry is higher compared to other countries in the region. By maintaining the current tariff, they hope to stimulate industrial growth. Additionally, 77 percent of industrial consumers will not be subjected to fixed charges. NEPRA member Mthar Rana mentioned that discussions with independent power producers (IPPs) are possible if the Prime Minister gives approval. He noted that there might be room for adjustments, highlighting inefficiencies in electricity generation and the need to address issues like insurance and other related matters.