Karachi residents' June–September electricity rates increased by Rs3.23

ISLAMABAD: To pay off a nine-month backlog of fuel cost adjustments (FCA), the National Electric Power Regulatory Authority (Nepra) on Friday announced a further rise in power prices for K-Electric customers of up to Rs3.23 per unit for four months, from June to September.

KE aimed to obtain up to Rs26 billion from the consumers at different rates, ranging from an increase of Rs4.96 to 96 paise per unit for seven months to a decrease of Rs1.28 to 1.48 per unit for two months. The total FCA for the three quarters (July 2023 to March 2024) of the previous fiscal year was approximately Rs18.6 per unit.

?

Nepra temporarily approved roughly half of the adjustment and spaced it out so that, "to avoid overburdening the consumers," the consumers would pay an additional Rs2.68 per unit in June, Rs3.11 per unit in July, Rs3.22 per unit in August, and roughly Re1 per unit in September.

?

This means that in four months, KE should be able to collect almost Rs12 billion.

?

This led to a net increased burden on consumers in June of Rs2.68 per unit as a consequence of the regulator clubbing the positive FCA of Rs4.49 for October 2023 with the negative FCA of Rs1.82 per unit.

?

Similarly, the combined July and September 2023 positive FCAs of Rs1.71 and Rs1.40 per unit resulted in an extra burden of Rs3.11 per unit for customers in July 2024 bills.

?

Similarly, for August, November, and December of 2023, three smaller positive FCAs of 66 paise, Rs. 1.77, and 79 paise were combined. Customers' August bills will increase by around Rs3.22 per unit as a result.

?

Additionally, it added up to almost Re1 per unit in September billing by combining a positive FCA of Rs2.97 for January with a negative Rs1.97 per unit for March.

?

Remarkably, Chairman Waseem Mukhtar, who was away on a foreign journey at the time, was one of the four signatories to the decision, but Nepra member Sindh Rafique A. Shaikh, who chaired the public hearing on KE's request for a nine-month fuel bill, did not sign it.

?

The customers of other Discos in the nation had already gone through a similar process of paying FCA monthly, with an average rate of roughly Rs2.89 per unit for the same period (July 2023 to March 2024), according to KE's statement, which welcomed Nepra's notification. Meanwhile, the provisional FCA allowed to KE average Rs1.26 per unit.

?

According to Section 31(7)(iv) of the Nepra Act, fuel cost adjustments must be performed within the authorized tariff. The regulator said that it was authorizing interim FCAs at KE's request to prevent a sudden shock to customers.

?

Nevertheless, the authorized tariff that applies in the current instance is the interim tariff as decided by it, as the multi-year tariff (MYT) for the 2023–30 period "is not yet in effect and remains to be determined."

?

Consequently, to arrive at these extra FCAs, the reference fuel cost number—which is permitted under the interim tariff for the quarter ending in March 2023—was taken into consideration.

?

To reduce the backlog and keep its customers from experiencing an abrupt rise in load, KE offered three possibilities for greater FCA recovery from them on a "provisional basis."

?

As per the present interim tariff, KE suggested that in the first scenario, the FCA should be determined by subtracting the actual fuel cost from the monthly fuel cost referenced in the first scenario.

?

Under this plan, KE hoped to generate a net extra income of around Rs20 billion by raising rates for seven months and lowering them for the last two. About Rs13 per unit, or an average of Rs1.45 per unit each month, is the cumulative net effect over nine months.

?

According to the tariff petition that KE submitted and is now being considered by Nepra, KE requested under the second option that it be permitted to charge customers the difference between the real and reference monthly fuel costs.

?

In this instance, to earn around Rs26 billion, the utility has also requested a seven-month rise in fuel costs and a two-month decrease in fuel costs, for a net cumulative increased fuel cost of Rs18.6 per unit at a monthly average of Rs2.06 per unit.

?

The utility requested an extra FCA for seven months and a reduction in two months in the third scenario. There was a financial effect of around Rs22 billion, with a net combined impact of Rs16.9, based on a monthly average of roughly Rs1.90 per unit.