Nepra hints at allowing Discos to recover additional Rs170 billion from consumers

ISLAMABAD-National Electric Power Regulatory Authority has hinted at allowing the power distribution companies (Discos) to recover an additional Rs5.40 per unit (Rs170 billion) from the power consumers on the account of quarterly tariff adjustments.
In a public hearing, NEPRA noted that the proposed provincialisation of the Discos was not a solution to the problem as the power sector required structural changes to bring some improvement. The government has recommended NEPRA that instead of the recovery of Rs 5.40 per unit in three months, the regulator should allow the collection of Rs2.31 per unit in six months period, which will have less impact on the consumers.
The decision will have an impact of Rs 170 billion (QTA Rs144.68b +18pc GST) on the power consumers. The suggestion of recovery in six months, instead of three months, was made because of the government fear that consumers would be unable to pay their bills owing to the hike of Rs5.40/unit. “Consumers had refused to pay electricity bills last year following massive hike in electricity rates,” official of the Power Division informed. This time such a situation could happen again, the official added. Secondly, he said the hike of Rs5.40 would result in low recovery of electricity bills due to hike in electricity rates.
In a public hearing, which has now become just a formality as the regulator is protecting the Discos by accepting each and every demand of the distribution companies for tariff hike, conducted by NEPRA it was informed that the power withdrawal has declined by 13 percent during the last quarter of FY 2023. The hearing was informed that the industrial consumers had shut down their businesses owing to massive hike in electricity rates. The closure of industrial units has resulted in substantial decline in the electricity demand of power distribution companies (Discos).
Ex-WAPDA distribution companies (Discos) had sought NEPRA’s nod for passing on the burden of additional Rs144.68 billion, including Rs122.413 billion on account of capacity charges, to power consumers on account of quarterly tariff adjustment (QTA) mechanism for the 4th quarter of FY2022-23.
The per unit increase in electricity rates will be Rs 5.40/unit. The interesting part of the Discos petition is the recovery of capacity payments from the consumers. The major portion of recovery includes the capacity payments amounting to Rs 122 billion, which would be paid to those IPPs that remained idle and did not generate electricity.
While major portion of the country was facing up to 12 hours loadshedding, during the summer months, Discos had drawl 13 percent less electricity from their quota. The Discos preferred to pay huge amount of Rs122 billion to IPPs, as a capacity payments, instead of selling the electricity to the consumers.
The regulator was requested to allow recovery of electricity rates during the six months period. The electricity bills are normally low during the winter season and therefore, the consumers would not feel shocks in electricity bills,” officials said. They said that consumers were already paying Rs 1.24 per unit increase in electricity rates on account of quarterly adjustment, for the 3rd quarter of 2022-23, that would end in September. It was proposed to recover Rs 1.24 per unit from September and Rs 2.31 per unit increase starting from October. It would have a minor impact in electricity bills of consumers, official claimed.
Discos had sold out five billion units less to the consumers. This means that either demand had been reduced during the period under review or the Discos have willfully resorted to forced loadshedding. It was informed that there were two factors that impacted electricity demand including: weather and industrial demand. The weather was not extremely hot, during the period under review, resulting in less demand, while industries had shut down their businesses due to hike in electricity rates. However, the chief executive officers (CEOs) of the distribution companies were clueless about the reason for reduction in electricity demand. NEPRA expressed serious concerns over failure of CEOs to explain about low utilization of the electricity. It was further informed that each Disco was drawing 600 to 700MW less electricity from the system due to low demand. While the demand for the electricity was declining, the number of pending connections in Discos have reached 3,50000.
NEPRA has observed that growth projection was not realistic. It was informed that growth projection was made based on last year data when weather was too hot. The regulator sought explanation of low sale of electricity during the 4th quarter of 2022-23. Power regulator also noted with serious concerns that sale of Gepco had decreased despite the fact it had steel melter industry. The sale of Lesco also dipped by 14 percent and it had also steel melter industry. Similarly, Faisalabad Company was also impacted. Power regulator also raised concerns over recovery of hike in electricity bills during six months period .It said that such situation would impact the cash flow of the Discos to add into circular debt. NEPRA has reserved the judgment, and will release it later.

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