The Central Power Purchasing Agency-Guarantee (CPPA-G) has run expensive power plants in violation of the merit order, which will put a burden of Rs28 billion on consumers.
CPPA-G operated expensive re-gasified liquefied natural gas (RLNG) and residual fuel oil (RFO)-based power plants while ignoring the cheaper imported coal-fired plants, which resulted in an increase of Rs1.829 per unit in electricity tariff on account of fuel charges adjustment (FCA) for August 2023.
While observing that, the power-sector regulator, the National Electric Power Regulatory Authority (Nepra), voiced serious concerns over the costly electricity generation at a public hearing on Wednesday.
In its petition, the CPPA-G requested for adjustment to the actual fuel charge component for August 2023. The actual cost was estimated at Rs8.4746 per kilowatt-hour (kWh) compared to the reference fuel charge component of Rs6.6457/kWh.
It indicated an increase of Rs1.829/kWh in fuel prices, resulting in a significant financial burden of Rs28.297 billion on consumers.
CPPA-G also sought approval of previous adjustments amounting to Rs0.13 per unit, which would be recovered from consumers.
The hearing was informed that RLNG allocation was 610 million cubic feet per day (mmcfd) for August 2023 while average consumption came in at 622 mmcfd.
To avoid the overloading of certain grids and transmission lines, an amount of Rs290.83 million had been allocated. The financial impact due to system constraints was calculated at Rs590.04 million.
Nepra expressed concerns over system constraints, highlighting that it had approved an investment plan for National Transmission and Despatch Company (NTDC) but the money was not invested to remove constraints.
Responding to that, NTDC officials said that the company had been importing 90% of equipment but it encountered hurdles in the way of opening Letters of Credit over the past one year. There were also issues pertaining to land acquisition for laying transmission lines, they said.
However, Nepra was not satisfied with the arguments and said that the issues should have been taken up with the higher authorities.
The hearing was told that RFO-based electricity was cheaper compared to the Sahiwal coal-based plant, which was why electricity was not taken from that plant.
The supply of electricity through the captive power plants (CPPs) was also taken up for discussion.
Sui Southern Gas Company (SSGC), in a letter issued on August 29, 2023, stated that the Ministry of Energy had withdrawn its earlier directives for the issuance of no-objection certificates (NOCs) to CPPs for the sale of surplus electricity to the distribution companies.
The ministry, in its directive, stated that both Sui companies would no longer issue NOCs to CPPs. In compliance with the directive, SSGC revoked the NOCs that had been issued to various CPPs.
Nepra deliberated on whether to consider the energy and cost claims of CPPs in determining the FCA or take an alternative approach for June and July 2023. However, it was informed that CPPs supplied electricity during August.
NTDC officials contended that they were not aware of any such letter of SSGC.
They also requested the regulator to release the held-up money. According to Nepra, it had blocked the release of Rs40 billion due to the inefficiency of NTDC and its cost could not be passed on to consumers.
The Nepra chairman revealed that there was no good news for NTDC in the third-party audit arranged by the regulator.
He stressed that they were trying to bring transparency and do a balancing act to protect consumers.
“The authority is in a thought process to examine which prudent cost should be passed on to consumers,” he said, adding that they withheld Rs39-40 billion as they were not satisfied.
The regulator declared that they would not give any extension to the independent power plants (IPPs) to burden the consumers more.
KE tariff raised up to Rs4.45
The Karachiites should brace for a jolt in the form of a significant increase in the power tariff of K-Electric (KE) as Nepra on Wednesday approved an increase of up to Rs4.45 per unit.
On a request of the federal government, Nepra approved the tariff hike under the first-quarter adjustment for financial year 2022-23 and forwarded its decision to the government for a notification.
Following the notification, the increase in electricity prices will be applicable to the consumers of Karachi.
According to Nepra’s decision, the tariff will be raised in the range of Rs1.49 to Rs4.45 per unit and the additional collection from KE consumers will be made in October and November 2023.
The tariff has been increased by Rs1.48 per unit for those who consume up to 300 units in a month while those who consume 301 to 700 units and more will face a hike of Rs3.21 per unit. Similarly, the price has been raised by Rs4.45 per unit for those consumers who use more than 5 kilowatts of electricity. Furthermore, the tariff has been hiked by Rs4.45/unit for the electric vehicle charging stations.
Published in The Express Tribune, September 28th2023.
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