Nepra allows application of Rs3.23 per unit surcharge on consumers from July 1

It is worth mentioning here that NEPRA had already allowed the federal government to impose an additional surcharge of Rs 3.39 per unit and Rs. 1 per unit from Mar-Jun 2023 and Jul 2023 to June 2024, respectively. With the application of an additional Rs. 3.39 per unit, the total surcharge becomes Rs. 3.82 per unit for the four months of 2022-23, as the government is already charging Rs 0.43 per unit from power consumers. While for the new fiscal year starting July 1, the surcharge will be Rs 1.43 per unit.

However, in a motion filed by the federal government with respect to Consumer End Tariff recommendations of XWDlSCOs and K-Electric, it has been requested that the already approved surcharges of Rs 3.82/unit and Rs 1.43/unit, are not sufficient to meet the electric services obligations of government. The federal government has requested to enhance the surcharge by Rs 1.80/unit from the already approved Rs 1.43/unit to Rs 3.23/unit for the next fiscal year.  

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NEPRA had conducted a public hearing on the federal government motion. During hearing while responding to the query from the Authority regarding financial obligations of the federal government, the representative of the MoE explained that presently the financial obligations of the government are around Rs.2.6 trillion, which includes over Rs. 1.7 trillion payables to IPPs and Rs.765 billion of PHL loans. Through the instant motion, the total surcharge would be around Rs.335 billion, which will cover Rs. 126 billion of the PHL markup, and the remaining Rs.209 billion to cover the flow of circular debt. It also submitted that there are multiple factors/reasons for these payable to IPPs, which primarily includes interest payable to IPPs for not making them timely payments, delayed application of monthly FCAs and Quarterly adjustments etc.

It was also apprised that the federal government has already paid Rs.230 billion of PHL loans principal amount, thus, reducing the PHL loans and subsequent reduction in the amount of markup. It also submitted that the federal government, as per the available resources, is paying the principal amount of PHL, as it becomes due, thus, reducing the amount of markup.

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In the hearing, the Authority observed that flow of circular debt also includes inefficiency of DISCOs in terms of extra T&D losses and under recoveries.

Tanveer Ban, representing KCCI, opposed the motion by submitting that these are inefficiencies of DISCOs which shall not be passed on to the consumers. It was also stated that since the surcharge would only be used for the interest payments, and not the principal amount, therefore, these surcharges would continue indefinitely.

Imran Shahid, a consumer of K-Electric, submitted that driver for sustainable growth is affordable electricity, however, with these surcharges, the already shrinking exports would be further impacted due to high cost of electricity and inflation. He opposed the motion by stating that burden of circular debt shall not be passed on to the consumers.

Arif Bilwani, a consumer of K-Electric, while objecting the motion, submitted that this is an open ended surcharge, which will not resolve the issue, as the principal amount is not being paid. Recent substantial devaluation of Pak rupee, massive increase in CPI and upward trend in interest rates, will result in unimaginable increase in payments to IPPs besides increase in fuel prices, directly affecting the cost of production of power. Exports are already reducing, with large scale industry witnessing negative growth, and this will result in increase in unutilized capacity. 

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The other consumers present during the hearing also opposed the imposition of surcharges, said the decision.