ISSUE OF ELECTRICITY TARIFF

TARIQ AHMED SAEEDI (tariqsaeedi@hotmail.com)
Aug 03 - 09, 2009

The present democratically elected government has no apparent leeway to desist proposed surge in electricity tariffs as it has claimed to detect a considerable difference in cost of generation and total recovery against electricity supply, and this source is figured in the list of quick-fix solutions recommended under IMF conditionalities to curtail government subsidies. To save itself from the anger of powerless people in the aftermath of increase in electricity tariffs, government has aptly extricated itself from the affairs of determining the future course of rates by asserting Nepra's sole authority over the issue. Not once but several a time government officials defended the authority of regulatory authority to implement tariff revision. Recently federal information minister Qamar Zaman Kaira told a meeting in the governor house there was a gap of Rs190 billion. Nepra would decide about the tariffs, he said.

In addition, Supreme Court removed the stay order that had constricted the authority to keep unchanged electricity tariffs until March. Tariffs upward revision would be taken across the country and be applicable on all distribution companies under Pakistan electric and power company, however in Karachi country's sole independent power company, KESC would determine the new prices separately. While privately run power utility is adamant of spiking price of its services, whatever little it is providing, industrialists and businessmen find no reason and logic in demand of increase in consumer-end tariffs by over Re1 per unit and security deposits.

In pursuance of KESC's tariff petition in which the utility has sought upward revision in tariff and security deposit, Nepra announced a public hearing in Karachi on August 12. It welcomed intervention requests by party for or against tariff petition. A person named Dr. Kazi Ahmed Kamal who claimed to have filed an intervention request, said: "He was doubtful if KESC would not achieve desirable results of its petition." KESC would come up with technical justifications out of common person's comprehension, he commented during the 4th meeting of the public sector utilities organized by Karachi Chamber of Commerce & Industry. His fear was based on riposte, he said he received in reply to his query, which was full of jargon. The participants appreciated his suggestion of taking service of experts who could negotiate as public representative in the hearing.

Former president Site Association Nisar Shaikhani warned proposed astronomical increase in security deposits from Rs600 per kw to Rs8000 per kw would discourage new industrial setups. Especially, small and medium enterprises would baulk at security deposits of Rs4 million for requisition of 50 kw, he maintained. Through a resolution in the meeting, businesspersons condemned the proposed hike in tariffs. Operational efficiency of KESC has been questioned many a time, but it is not making sense to people that what actually stops concerned ministry from seriously taking the KESC to the task when scepticism of manipulation in bills is all heard; investments on improving distribution and transmission are not in accordance with the privatization agreement whereas remunerations of top and mid level management and officers are eccentrically on increase; and electricity breakdowns have become common.

A high-profile ministerial meeting was held last week that was supposed to give scintilla of sustenance to KESC's oppressed customers by taking strict actions against the utility which has been accused of fleecing power consumers. In contrast, the meeting had emerged as a platform for fulfilling the utility's demands. Due to importance of Karachi's pivotal position in the national economy, the issue of power crisis was thoroughly discussed in the meeting. Federal Information Minister observed during the special cabinet meeting on energy that generation was not as serious issue as transmission and distribution was. KESC claimed it would rejuvenate the distribution network within one year. It claimed to have installed so far 650MW transformers. KESC reportedly said it had replaced 10 percent of decrepit distribution network last December.

Attended by Governor Sindh, Chief Minister Sindh, and federal ministers the meeting was an apparent warning to KESC to correct its distribution network and come up with up details of its operation in another meeting supposed to be held this week in Islamabad. The meeting was unique in terms of its resounding rhetorical criticism of the utility's functioning and performance. Whenever the KESC has been asked to explain its position, it blamed generation or line losses for electricity breakdown across the city. Neither, government asked it nor it illustrated itself that why there are untraceable tariffs mentioned on electricity bills. Sources privy to rates calculation by the utility say normally tariffs in paisa are increased without coming in to notice of the public. Even if it is not true, questions over the dubious formula of calculation cannot be ignored.

The power company is duty bound to supply unhindered supply of electricity for which it is charging consumers. Two main demands have been put forward before the KESC in the cabinet meeting on energy. First was the request of investment plan, which influential management has not bothered to disclose despite being asked for it twice or thrice in recent past. Second, the utility was demanded of revamping distribution networks in three towns of Gulshan-e-Iqbal, Gulberg, and Shah Faisal of Karachi by August 31. To support the overhaul, government directed Pepco to supply the necessary equipments. Concession on circular debt was provided in addition to furnace oil provision on 90 days credit. Daily gas quota was increased that would increase generation capacity. Pepco was strictly directed to uphold 650 MW supply to KESC. According to industrialists, electricity supply to industrial area has been improved. If KESC meets the demands, which are not difficult for it to meet given the state's patronage, it would have clear chit to go for sought-after adjustment in tariff mechanism and security deposits.