World news | Pakistan regulator increases power tariff by 20 pcs

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Islamabad (Pakistan), June 15 (ANI): The National Electricity Regulatory Authority (Nepra) on Friday announced a significant increase of almost 20 percent in the Single National Tariff, aimed at securing approximately PKR 3.8 trillion in financing for 10 former-Wapda electricity distribution companies (discos) in fiscal year 2024-25, Dawn reported.

The new PKR 5.72 per unit tariff will come into effect from July 1. This adjustment is expected to generate an additional PKR 485 billion in revenues for Discos, strengthening the government’s position to secure the IMF bailout scheduled for July.

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Nepra clarified that the government retains the power to apply different rates of increase to different categories of consumers through cross-subsidies, ensuring that the overall income requirements set by the regulator remain unchanged.

For the coming fiscal year, the national average basic tariff, including K-Electric, has been set at PKR 35.50 per unit (kilowatt-hour or kWh), a significant increase from the current PKR 27.78 per unit. According to Dawn, this adjustment is projected to generate around PKR 3.763 trillion in revenue for the 10 discoms in 2024-25, up from PKR 3.28 trillion in the current year.

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After factoring in the 18 percent general sales tax, the average base rate for next year is expected to increase to PKR 42 per unit, excluding other taxes, duties and ancillary charges. This adjustment would impose an additional burden of approximately PKR 580 billion on Disco consumers.

It is worth noting that these figures do not include the potential impact on K-Electric, which is subject to the same basic rate despite being separate from discoms.

The disparity between consumer and industrial tariffs was highlighted by the PKR 10.69 per unit cut announced by the Prime Minister, aimed at reducing the financial burden on industrial consumers.

This adjustment is expected to shift revenues by approximately PKR 200 billion to domestic, commercial and mass market consumers.

Once approved by the Federal Government, the Power Department will submit the tariff table to Nepra for allocation of subsidy among different categories of consumers before final notification, in line with the commitments made to the IMF.

In its findings released on Friday, Nepra detailed the revenue requirements of each distribution company for the next fiscal year, along with calculations of the average power purchase price (PPP) across the country.

According to Nepra’s estimates, the projected PPP for Discos for 2024-25, excluding K-Electric, is PKR 3,277.506 billion. This figure includes PKR 1,161.257 billion for fuel and variable O&M costs and PKR 2,116.25 billion for capacity charges, which include service charges and market operator charges.

Nepra detailed the elements of the PPP, noting that capacity payments make up approximately 65 percent of the total PPP envisage, while energy costs make up the remaining 35 percent. On a per unit basis before allowable transmission and distribution losses, capacity charges are PKR 17.66 per unit and energy charges are PKR 9.69 per unit, for a total of PKR 27.35 per unit in 2024-25.

Factoring in losses and distribution margins, the average tariff increases to PKR 35.50 per unit, an increase mainly attributed to factors such as currency depreciation, inflation, high interest rates, capacity expansion and slow sales growth, according to Nepra, as reported by Dawn.

An official source indicated that after taking into account additional fees, taxes, duties and levies, and monthly and quarterly adjustments, the actual average national rate could increase significantly, potentially reaching PKR 65 to PKR 72 per unit.

This tariff adjustment is crucial to meeting IMF assistance conditions and accelerating structural reforms, particularly in the stability of the energy sector and the governance of state-owned enterprises.

Last year, a similar tariff hike resulted in an increase in the national single electricity tariff by an average of PKR 5 per unit, resulting in a financial impact of PKR 477 billion and PKR 7.91 per unit in 2022-2023, with consumers bearing a burden of PKR 893 billion. This increase coincided with a noticeable drop in electricity consumption by 7-13%.

Even though K-Electric is not directly involved in the discom tariff determination process, its consumers will ultimately have to pay the same base rate due to uniformity in the national tariff policy, Dawn reports. (OR)

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