Electricity prices hiked by 20% in Pakistan

This adjustment is anticipated to shift approximately PKR 200 billion in revenue impact to domestic, commercial, and bulk power consumers…reports Asian Lite News

The National Electric Power Regulatory Authority (Nepra) announced on Friday a substantial increase of nearly 20 per cent in the uniform national tariff, aimed at securing approximately PKR 3.8 trillion in funding for the 10 ex-Wapda electricity distribution companies (Discos) during the fiscal year 2024-25, Dawn reported.

The new tariff of PKR 5.72 per unit will take effect on July 1. This adjustment is expected to generate an additional PKR 485 billion in revenue for Discos, bolstering the government’s position in securing an IMF bailout slated for July.

Nepra clarified that the government retains the authority to apply varying rates of increase across different consumer categories through cross-subsidies, ensuring the overall revenue requirements set by the regulator remain unaffected.

For the upcoming fiscal year, the average national base tariff, inclusive of K-Electric, is set at PKR 35.50 per unit (kilowatt-hour or kWh), marking a notable increase from the current PKR 27.78 per unit. This adjustment is projected to yield approximately PKR 3.763 trillion in revenue for the 10 Discos in 2024-25, up from PKR 3.28 trillion in the current year, according to Dawn.

After factoring in an 18 per cent general sales tax, the average base tariff for next year is expected to rise to PKR 42 per unit, excluding other taxes, duties, and surcharges. This adjustment would impose an additional burden of about PKR 580 billion on Disco consumers.

Notably, these figures do not encompass potential impacts on K-Electric, which is subject to the same base rate despite being separate from the Discos.

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

This adjustment is anticipated to shift approximately PKR 200 billion in revenue impact to domestic, commercial, and bulk power consumers.

Following federal cabinet approval, the Power Division will submit a tariff table to Nepra for subsidy allocation across various consumer categories before final notification, aligning with commitments made to the IMF.

In its determinations released Friday, Nepra detailed the revenue requirements for each distribution company for the next fiscal year, alongside calculations of the average power purchase price (PPP) nationwide.

According to Nepra’s assessments, the projected PPP for Discos in 2024-25, excluding K-Electric, totals PKR 3,277.506 billion. This figure comprises PKR 1,161.257 billion for fuel and variable operation and maintenance costs, and PKR 2,116.25 billion for capacity charges, encompassing service charges and market operator fees.

Nepra further broke down the components of the PPP, noting that capacity charges constitute approximately 65 per cent of the total projected PPP, while energy costs make up the remaining 35 per cent. On a per-unit basis before accounting for allowed transmission and distribution losses, capacity charges amount to PKR 17.66 per unit, with energy charges at PKR 9.69 per unit, totaling PKR 27.35 per unit for 2024-25.

Including losses and distribution margins, the average tariff increases to PKR 35.50 per unit, a rise attributed mainly to factors such as currency depreciation, inflation, high interest rates, capacity expansions, and sluggish sales growth, according to Nepra, as reported by Dawn.

An official source pointed out that when additional surcharges, taxes, duties, and levies are factored in, alongside monthly and quarterly adjustments, the actual average national tariff could escalate significantly, potentially reaching between PKR 65 and PKR 72 per unit.

This tariff adjustment is pivotal in meeting IMF bailout conditions and advancing structural reforms, particularly concerning the energy sector’s sustainability and the governance of state-owned enterprises.

Last year, a similar tariff hike saw the national uniform electricity tariff rise by an average of PKR 5 per unit, resulting in a financial impact of PKR 477 billion and PKR 7.91 per unit in 2022-23, with consumers bearing a PKR 893 billion burden. This increase coincided with a noticeable decline in electricity consumption by 7-13 per cent.

Despite K-Electric not being directly involved in the tariff-setting process for Discos, its consumers will ultimately face the same base rate due to the uniformity in national tariff policy, Dawn reported. (ANI)

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