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Business Recorder
14-06-2025
- Business
- Business Recorder
PD uncertain on power tariff changes from July 1
ISLAMABAD: The Power Division stated on Friday that it currently has no definitive estimate of whether electricity tariffs for distribution companies (Discos) will increase or decrease from July 1, 2025, as this depends on the approval of cost components already submitted to the regulator. These remarks were made by Additional Secretary (Power Finance) Mehfooz Bhatti during a public hearing on the interim distribution and supply tariffs of eight Discos for FY 2025-26 under the Multi-Year Tariff (MYT) regime. The statement came in response to a query raised by textile sector representative Aamir Sheikh. Eight Discos—GEPCO, QESCO, MEPCO, SEPCO, HESCO, PESCO, TESCO, and HAZECO—have submitted tariff petitions under the MYT framework for the five-year period from FY 2025-26 to FY 2029-30, seeking National Electric Power Regulatory Authority (NEPRA)'s approval of a combined revenue requirement exceeding Rs 455.6 billion for the upcoming fiscal year. 'I have no indication at all of what the industry tariff will be from July 1, 2025,' said Aamir Sheikh. 'Our tariff for B3 has dropped to Rs 31/32 (about 11 cents) per unit currently, and the government has committed to reducing it further. We have already booked export orders for the next quarter based on these rates. It's imperative for NEPRA, the Power Division, and the Government of Pakistan to ensure tariffs do not increase beyond May/June levels.' The hearing was briefly suspended by NEPRA Chairman Waseem Mukhtar, who demanded representation from a senior Power Division official. Mehfooz Bhatti eventually joined the session, replacing the Joint Secretary, whose presence NEPRA deemed insufficient. Bhatti, who liaises directly with the Finance Division on power sector subsidies, appeared uncertain regarding the projected tariff changes. 'There is an indication of Rs 250 billion in the budget for Targeted Distribution Subsidy (TDS) for 2025-26. We've already presented seven scenarios to the Regulator. Once the distribution margins are determined under MYT, we'll be in a better position to outline consumer tariffs after incorporating the government's subsidy. At this point, I can't provide figures, but rebasing will take effect from July 1, 2025,' he said. The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) strongly opposed any additional financial burden on consumers for the losses incurred by Discos under the MYT, until comprehensive reforms are implemented. The FPCCI argued that the burden of inefficiencies—including high technical and commercial losses, pension liabilities, and poor governance—is being unfairly transferred to consumers. Rehan Jawed from Karachi raised concerns about the poor performance of Hyderabad Electric Supply Company (HESCO), prompting NEPRA to announce that a verification team will visit HESCO upcoming Monday to investigate consumer complaints. Tanveer Barry of the Karachi Chamber of Commerce and Industry (KCCI) criticized Discos for rising losses due to operational inefficiencies, stating that consumers across Pakistan are unfairly burdened with the DSS surcharge on Power Holding Limited (PHL) loans. 'Discos' technical and commercial losses are worsening, and their recoveries fall short of NEPRA's targets. They haven't submitted investment and distribution plans, and the MYT submissions are incomplete,' Barry said. He emphasized that with power generation capacity projected to increase to 46,605 MW, resulting in higher capacity payments, the Time of Use (ToU) mechanism for industrial consumers should be abolished. He also called for third-party audits of Disco losses to present an accurate picture to NEPRA. CEOs and CFOs of the eight Discos presented details of their proposed distribution margins and expenditures. According to the tariff petition, GEPCO has sought approval of revenue requirement of Rs 67.821 billion of which Rs 16.598 billion is on account of pay & and allowances, Rs 13.815 billion post-retirement benefits, other expenses Rs 4.909 billion (total O&M cost Rs 43.446 billion), depreciation Rs 4.792 billion, RORB Rs 8.750 billion and other income negative Rs 5.418 billion other income and Prior Year Adjustment (PYA) Rs 24.375 billion. MEPCO has sought NEPRA's approval for revenue requirement of Rs 139.106 billion of which, pay and allowances are Rs 22.302 billion, post-retirement benefits Rs 29.384 billion, repair and maintenance, Rs 7.869 billion, travelling allowance Rs 1.936 billion, vehicles maintenance, Rs 1.161 billion, other expenses Rs 507 million (total O&M cost Rs 79.653 billion), depreciation Rs 4.792 billion, RORB Rs 8.750 billion, other income negative Rs 8.731 billion and Prior Year Adjustment Rs 79.453 billion. QESCO's total proposed revenue requirement for FY 2025-26 is Rs 50.120 billion which includes, pay and allowances Rs 9.947 billion, post-retirement benefits, Rs 3.044 billion, repair and maintenance, Rs1.496 billion, travelling allowance, Rs 1.936 billion, vehicles maintenance, Rs 797 billion, other expenses Rs 1.356 billion, (total) O&M cost Rs 17.100 billion), depreciation, Rs 2.944 billion, RORB Rs 15.696 billion, other income negative Rs 1.950 billion and PYA Rs 16.298 billion. SEPCO has sought total revenue requirement of Rs 58.053 billion, of which O&M cost is Rs 22.226 billion, Distribution Margin/Supply Margin, Rs 25.3032 billion, PYA Rs 25.522 billion. TESCO's revenue requirement for FY 2025-26 is estimated to be Rs 7.303 billion of which Rs O& M expense is Rs3.883 billion and DM/SM Rs 5.629 billion. PESCO's total revenue requirement for FY 2025-26 is Rs 81.449 billion which includes O&M expense Rs 37 billion, DM/ SM- Rs 52 billion and PYA Rs 29.344 billion. Hazara Electric Supply Company (HAZECO) which has been bifurcated from PESCO also presented its one-year revenue requirement. HESCO's total revenue requirement for FY 2205-26 is Rs 39.448 billion of which O& M expense is Rs 25.130 billion, DM/SM Rs 33.693 billion and PYA Rs 5.755 billion. HESCO's total revenue requirement is Rs 12.320 billion for the FY 2025-26, which includes O&M Rs 7.883 billion, depreciation, Rs 831 million, RORB Rs 3.028 billion, advance tax Rs 1.129 billion and other income negative Rs 550 million. Copyright Business Recorder, 2025
Express Tribune
05-04-2025
- Business
- Express Tribune
Oil consumers to fund tariff cut
Listen to article Oil consumers are set to mainly fund the recent reduction in electricity tariffs up to 17% under the prime minister's relief package. The National Electric Power Regulatory Authority (Nepra) on Friday held a public hearing to consider the government's request for a tariff reduction of Rs1.71 per unit for consumers across Pakistan, including Karachi. It was informed that total subsidy had been increased to Rs266 billion after adding Rs58.6 billion worth of petroleum development levy (PDL). Currently, the government is providing Rs266 billion in tariff differential subsidy to bridge the gap between actual and notified tariffs, which could rise to Rs324 billion with the latest tariff proposal. The government has recently increased PDL from Rs60 to Rs70 per litre on petrol and diesel each but it announced that its impact would be redirected to electricity consumers. Now, it is believed that oil consumers will provide Rs58 billion in additional PDL to cross-subsidise the electricity consumers. At the hearing, Nepra directed the Power Division to clear the confusion among consumers, especially the industrial sector. While hearing a government petition for the tariff reduction of Rs1.71 per unit on account of additional PDL of Rs58.6 billion for three months, Nepra chairman stated that work was underway to firm up the prime minister's announcement of a power tariff cut of Rs7.69 per unit for industrial consumers and Rs7.41 per unit for domestic consumers, excluding lifeline users. He added that consumers would receive an immediate relief of Rs5.03 per unit within the next few days, while the remaining relief would be provided in the quarterly tariff adjustment (QTA) for the third quarter. Industrialist Aamir Sheikh acknowledged the tariff reduction but pointed out that there was a discrepancy as Nepra chairman cited a relief of Rs5 per unit whereas the Power Division indicated a reduction of Rs6. The breakdown of QTA relief includes Rs1.9 per unit under the tariff differential subsidy, Rs1.71 under QTA and Rs1.36 under the fuel price adjustment (comprising Rs0.46 and Rs0.90 per unit). "I hope Nepra will clarify whether the relief from the upcoming QTA will be given to consumers in the current quarter (April-June), meaning two QTA simultaneously, or it will be finalised now but will be implemented in the July-September quarter," he said. "If the next QTA is granted in this quarter and is around minus Rs1 per unit, this clarification would allow us to estimate a net relief of around Rs4 per unit and plan export sales accordingly," he added. Arif Bilwani and Tanveer Barry also sought clarifications on several points raised during the public hearing. The proposed decrease in tariff is required to be implemented through an increase in the tariff differential subsidy, with the government already securing cabinet's approval before submitting the request to Nepra. The relief will be applicable to all power distribution companies, including K-Electric (KE), for three months. However, officials clarified that lifeline consumers would not enjoy the benefit. According to Power Division officials, the government aims to offset the cost through estimated savings of Rs58 billion by keeping petroleum prices stable over the next three months. Additional relief is being provided through revisions in power purchase agreements as savings of Rs12 billion following negotiations with independent power producers (IPPs) had already been included in the recent QTA. The government is also negotiating with banks to cope with the circular debt. These talks are part of a broader strategy to finalise an arrangement that could slash liabilities in the power sector. Officials clarified that the relief to consumers was being provided through quarterly adjustments instead of annual rebasing because of the current economic conditions. Nepra officials confirmed that a relief of Rs1.36 per unit had already been granted under the fuel charges adjustment and with the proposed reduction of Rs1.71, consumers could receive an immediate cumulative relief of Rs5.03 to Rs5.04 per unit. The authority will review the submitted data and issue a formal decision. Power Division officials emphasised that the continuation of relief measures would depend on macroeconomic stability, noting that the current financial situation did not allow for annual tariff rebasing, which was why quarterly adjustments were being used. The third quarterly adjustment request is expected to be submitted in the second week of April. During the hearing, concerns were raised about the burden being placed on grid-connected consumers due to increasing net-metering connections, translating into a tariff hike of Rs1.5 per kilowatt-hour (kWh). In response, Nepra officials stated that the government was actively deliberating on the issue and was expected to announce a decision soon. They added that adjustments may also be introduced during the upcoming tariff rebasing to ensure fairness while protecting grid consumers. Rs3.02 relief for KE consumers Separately, Nepra issued its decision on KE's petition for the provisional fuel charges adjustment for January 2025, indicating a relief of Rs3.02 per kWh. This will be passed on to consumers in April 2025 bills. Nepra provisionally retained Rs2 billion in respect of adjustments on account of partial load, open cycle and degradation curves along with start-up cost pursuant to its decision regarding generation tariff for the period July 2023 onwards from the fuel charges adjustment for January 2025. It would be adjusted against pending KE claims to ensure that consumers are not burdened at a later stage.
