ISLAMABAD -  The National Electric Power Regulatory Authority (Nepra) on Wednesday allowed about Rs3 per unit increase in bulk hydropower tariff for 19 hydropower projects for Water and Power Development Authority (Wapda).

The Nepra’s decision will help to generate additional revenue of about Rs119 billion in a year, said the Nepra determination report. The regulator rejected the KP demand of allowing Net Hydel Proft (NHP) as per the AGN Kazi formula and allowed an increase @ Rs1.10 per unit for one year.

However, KP Member in Nepra, Himayatullah Khan, in his dissension note disagreed with the idea of permanent fixing the NHP @ Rs1.10 per unit and said that this is in violation of the constitution. He said that under the interim arrangement, of fixed NHP @ Rs1.10/kwh indexed at 5/0 per annum, there is no other option but to pass on the amount of NHP to the end consumer. However, having said that, it is important to point out that the end consumers are already paying NHP in the monthly bills. This amount is collected by the Discos and passed on to CPPA-G from where it is diverted towards payment to expensive power stations.

He further said, “If we take the case of Tarbela and Ghazi Barotha Hydropower Project (GBHPP), a unit of electricity is generated at approximately Rs0.64/kwh and Rs1.85/kwh respectively, while the consumer actually pays @ Rs11.45/kwh. Thus yielding Rs10.81/kwh and Rs9.60/kwh as net profit for each station. If we take roughly 15,000 GWh produced by Tarbela and 6,808 GWh by GBHPP, during 2016-17, the consumer has already paid into the system approximately Rs227 billion as NHP, on these two stations alone.” “However, instead of this amount being paid to the provinces as NHP, it is being diverted towards subsidising the power sector. This amount goes towards payments to expensive power generating units, such as Wind (Rs22/kwh), Solar (Rs20/kwh), Bagasse (Rs13/kwh), IPP (HSD Rs22/kwh) and public sector Gencos, at the expense of the provinces,” the Nepra member added.

“In this way the overall national basket price of electricity is manipulated and maintained at a lower level than what would be the price if due amounts of NHP were paid to the provinces in accordance with Article 161(2) of the Constitution and CCI decisions dated 12.01.1991, 12.09.1993, 25.05.1997 and 22.12.1998,” Member KP said.

Himayatullah further said Article 161(2) of the Constitution provides "The net profits earned by the federal government, or any undertaking established or administered by the federal government from the bulk generation of power at a hydro-electric station shall be paid to the province in which the hydro-electric station is situated."

“There is therefore no provision in the Constitution for a pre-determined fixed rate of NHP, to be applied uniformly across the board, to all hydro power stations without taking into consideration the revenues/expenses of that particular station. Moreover, by applying a notional fixed NHP rate, certain loss making stations would also be shown generating a net profit which would not be a true reflection of the state of affairs of that station, he maintained. “At best, a fixed NHP rate, as in the in the instant case, can be applied only as an interim arrangement and not as a permanent dispensation,” he proposed.

The Nepra further said the power regulator held that major increase was necessitated by decision of the Council of Common Interests (CCI) to pay more than Rs86 billion arrears to Khyber Pakhtunkhwa (Rs24.3 billion) and Punjab (Rs62 billion) on account of NHP. The remaining Rs33 billion was also required for payment to the two provinces on account of regular NHP payments at the rate of Rs22 billion per annum to KP and Rs10 billion to Punjab.

The CCI decision and subsequent agreement with provinces entailed KP and Punjab to get Rs1.10 on each unit of electricity produced at public sector projects like Tarbela and Ghazi Barotha in 2015-16 which has now been indexed up at Rs1.16 per unit.

The regulator noted that centre and KP signed an MoU in February 2015 which was concurred by the CCI in its decision on February 29, 2016 wherein regular NHP at the rate of Rs1.10/kWh was fixed and payment of Rs70.0 billion was agreed as full and final settlement. The same was later on included by Nepra in the tariff of Wapda Hydroelectric and notified in June 2016.

The similar agreement was also extended to Punjab in December 2016 on the analogy of KP. The NHP was payable to the provinces through the revision of bulk supply tariff for fiscal year 2017-18 as cost of generation and passed on to consumers.

The regulator said under Article 161 (2) of the Constitution, the computation of NHP shall be in accordance with a rate to be determined by CCI exclusively and no other authority or body can make a determination on the subject matter. This fact has also been recognised by the Supreme Court of Pakistan in the Gadoon Textile Mills case.

The Nepra said the Kazi Committee Mechanism (KCM) under which the NHP was originally calculated for KP was not sacrosanct but the decisions of the CCI because KCM had been amended, revised, enhanced, curtailed and even outright rejected in various disputes and for various parties. “The CCI itself has approved other methodologies for calculating Net Hydel Profits and invalidated the KCM from time to time, leaving the subject matter open to dispute”

Hence, in the given situation, the constitutional forum of CCI which is mandated to determine the amounts of Net Hydel Profit as per the provisions of Constitution of Pakistan and resultantly, any dispute relating to the application or determination of Net Hydel Profits, or the underlying methodology for calculation of the same, would remain within the exclusive domain of the CCI.

The regulator said the decision was taken on the request of Wapda which said it was required to make the payment to the Punjab government for Rs82.71 billion as arrears of NHP, duly approved by CCI and it will be the full and final settlement of the claim of the Punjab government as on June 2016. To settle Rs38.12 billion, Wapda had issue irrevocable promissory note on December 31, 2016 without any impact on tariff.