...Ever increasing electricity charge
Domestic consumers being asked to bear the largest
increase and all the consumers forced to pay for the inefficiency of
By SHABBIR H. KAZMI
Dec 11 - 17, 2000
The National Electric Power Regulatory Authority (NEPRA)
has allowed tariff increase to WAPDA, which will also be applicable on
the Karachi Electric Supply Corporation (KESC). However, KESC still
has to go through the ritual. The Authority has allowed the WAPDA to
increase/decrease tariff on the basis of fuel price without going
through formal proceedings. It seems that NEPRA totally ignored the
huge transmission and distribution (T&D) losses being incurred by
the utility as consumers have been forced to pay for the inefficiency
of the utility, which is not fair.
The NEPRA has allowed an average increase in tariff
which comes to 4.78 per cent, against 19.70 per cent demanded by WAPDA.
The increase allowed in the tariff of the industrial consumers has
been restricted to only 13 paisa per kwh. As a consequence, the
increase in tariff for other customer classes ranges from 13 to 22
paisa per kwh. The impact of the increase in tariff will be passed on
to the consumers after the month of Ramadan.
The Authority has rejected Ministry of Water and
Power's petition to allow WAPDA an increase of 64 paisa per kwh in the
average electricity tariff but allowed WAPDA's tariff to be adjusted
automatically on account of variation in fuel prices on quarterly
approval basis. This arrangement will allow WAPDA to maintain its
financial viability by avoiding regulatory lag on account of filing
the tariff petition. It will also benefit the electricity consumers of
any reduction in fuel prices which will be promptly transferred by the
utility without waiting for a full scale tariff review. The increase
due to automatic tariff adjustment allowed in any quarter would be
restricted to 3 per cent and the balance compensation, if any, will be
deferred to the next quarter.
At the end of each financial year, NEPRA will carry
out a detailed review of the tariff and determine the tariff for the
next year after thoroughly examining all costs and expected revenues
of the utilities and considering the views of interested/affected
consumers as per rules.
The WAPDA's claim of recovering over Rs 17 billion
through increase in tariff, due to increase in fuel prices since the
last determination in June 2000, has been restricted by NEPRA to only
Rs 5 billion. The balance amount has to be recovered from a reasonable
portion of its receivables, reduction of the losses, projected
increase in sales revenue for the current financial year and other
factors outlined in the determination.
While distributing the burden on individual
customer classes, NEPRA has excluded domestic customers using up to 50
units in a month as well as commercial customers and public lighting
from any increase.
However, sector analysts strongly believe that
making the decision in favour of WAPDA, the Authority ignored the
ground reality. Global crude oil prices after touching the highest
have already started receding. OPEC has increased the quota of members
and supplies from Iraq are also expected to increase. Therefore,
prices of furnace oil and other products are bound to come down as the
price of crude oil is expected to move within a bandwidth of US$ 20 to
25 per barrel. They also say that the interim relief was enough to
take care of increased furnace oil cost in the past and there was no
need to allow hike in tariff. They strongly believe that since there
is no evidence that GoP/utilities have ever reduced the fuel
price/electricity tariff due to reduction in international prices of
crude oil, a cap on tariff would have been a more prudent decision.
These analysts say that the real problem of
state-owned utilities (WAPDA as well as KESC) is huge and out of
proportion T&D losses and not the fuel cost or power purchase from
IPPs. The recent increase in fuel price was a temporary phenomena
because the utilities were allowed interim relief.
At no point, a fact should be ignored that both
WAPDA and KESC suffer from inefficiency, mismanagement and corruption.
Therefore, it may not be wrong to say that NEPRA has endorsed their
inefficiency and consumers are forced to pay for that. Unless
operational efficiency is improved, no other measure, including
increase in tariff, can improve cashflow of these utilities.
The KESC should get electricity at a lower cost
from WAPDA because it (WAPDA) is propagating the philosophy of selling
electricity to bulk buyers at a discount. KESC is still the largest
bulk buyer of WAPDA and if it buys even larger number of units, as
proposed earlier, it would be the biggest buyer. On top of any
argument, is it not inherent right of consumers in KESC's franchised
area to get 10 per cent of electricity produced at hydel power plants
at cost? They deserve this not only as their inherent right but also
because industrial units located in Karachi are the major supplier of
products for upcountry market and also because they contribute heavily
towards fuel freight pool, for the transportation of other POL