Nepra reduces KESC tariff by 13 paisa per unit

[Naveed Yaseen]

MUSHTAQ GHUMMAN
ISLAMABAD (July 09 2009): The National Electric Power Regulatory Authority (Nepra) has reduced power tariff of Karachi Electric Supply Company Limited (KESC) by 13 paisa per unit, across the board, except on agriculture consumers and lifeline consumers using up to 50 units per month. The revised tariff is to be implemented from July 1, 2009. This adjustment in tariff is based on variation in fuel price and cost of power purchased during the quarter January to March 2009.

KESC, in its letter on April 30, 2009 had sought adjustment in its tariff, claiming that the variation in fuel cost due to fuel price variation and generation mix worked out to be minus Rs 4954 million, or minus paisa 44.31/kWh, while variation in cost of purchase of power was calculated as minus Rs 1058 million or paisa 9.46/kWh.

The cumulative effect was thus worked out to minus Rs 6012 million, or minus paisa 53.77/kWh. In addition to the above, KESC had claimed the following adjustment of cost in the current quarterly tariff adjustment request. An amount of Rs 6754 million, or paisa 60.40/kWh pertaining to the un-recovered cost of fuel and power purchase due to the application of 4 percent cap till September 2008.

Rs 4,622 million or paisa .41.33/kWh, comprising Rs 3,157 million on account of the difference between average disco's rate and the fixed rate ie paisa.369/kWh and Rs 1,465 million reconciled arrears of NTDC with KESC ending July 2008, due to the difference between marginal rate and fixed rate of paisa.369/kWh. In this regard, KESC referred to ECC's decision in its support. Therefore, KESC's overall tariff adjustment request in view of the aforesaid was indicated hereunder:

According to the information/data submitted by KESC the variation in the cost of fuel due to fuel price variation at KESC's own generation system for the quarter January-March 2009, works out to be minus Rs 4,957 million or decrease in consumer-end tariff by paisa 44.33/kWh.

The reduction in the fuel cost from that of previous quarter occurred primarily due to decrease in the price of furnace oil purchased and consumed by KESC at its own generation units during the current quarter and, therefore, approved by the Authority. As per decision of the Authority already notified by GOP vide SRO No 1131(1)/2008 dated October 30, 2008, KESC is required to pay NTDC at an average (basket rate of NTDC) for the power purchased from NTDC.

KESC's request for adjustment of un-recovered cost/loss in revenue of Rs 6754 million was considered by the Authority in its last two determinations for quarterly adjustments in KESC's tariff dated January 20, 2009 and April 10, 2009 respectively.

It was then decided by the Authority that KESC does not qualify for such adjustment of loss in revenue due to the reason that the existing mechanism for adjustment in tariff due to fuel price variation and the mechanism for adjustment in tariff due to power purchase cost variation already approved by the Authority and notified by GOP doesn't allow for adjustment of such loss in revenue/cost.

The Authority therefore, maintains that any loss to the utility either actual or implied which is not covered under the approved mechanism for adjustment in KESC's tariff can not be considered a pass through cost and adjusted in KESC's tariff. The Authority, therefore, maintains its previous decisions on the matter.

KESC had claimed a total of Rs 4,622 million or paisa.41.33/kWh, comprising Rs 1,465 million on account of difference between the marginal cost rate and the fixed rate of ie (paisa.369/kWh and Rs 3157 million on account of the reconciled arrears for the period August-October 2009 due to difference between Discos rate and fixed rate of paisa.369/kWh.

The Authority has observed that the dispute between NTDC and KESC over the past arrears on the basis of marginal cost rate was under consideration by a committee already constituted by GoP.

Since the decision of the committee over the matter has already been taken and approved by ECC, therefore, the Authority has decided to adjust the amount of Rs 4,622 million or paisa.41.33/kWh in KESC's tariff. As a result of this adjustment of arrears, the amount already set-aside by the Authority in the last quarterly adjustment of KESC, pending GoP decision, now stands settled/resolved.

The net combined effect, while incorporating both variations ie fuel price variation as well as the variation in power purchase cost and the outstanding arrears as per decision of GOP for the quarter January-March 2009 works out to be minus Rs 1,393.79 million or minus paisa.12.46/kWh. Hence, Nepra has allowed KESC to reduce power tariff by 13 paisa per unit.

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