The National Electric Power Regulatory Authority (NEPRA) has granted approval to the federal government’s request for a tariff hike of Rs. 3.28 per unit, applicable to all consumers nationwide from October 2023 to March 2024. This decision is expected to have an impact exceeding Rs. 200 billion.

The rate increase falls under the Quarterly Tariff Adjustment (QTA) mechanism, designed to address the additional financial burden resulting from factors such as currency devaluation and interest rate hikes, among others.

Initially, the Energy Ministry’s Power Division had sought a rate increase of Rs. 6.20 per unit for the fourth quarter of the 2022-23 fiscal year to address a financing gap of Rs. 146 billion within three months. In response to public protests, they adjusted it to a six-month staggered recovery plan at Rs. 3.55 per unit.

Subsequently, the Power Division also approached NEPRA to extend similar rates to K-Electric consumers for uniformity and to reduce the subsidy payable to them.

Following extensive public hearings and data analysis, NEPRA arrived at a positive adjustment figure of Rs. 135.584 billion.

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This adjustment takes into account various factors, including changes in capacity charges, variable Operations and Maintenance (O&M) costs, additional recovery on incremental sales, use of system charges, market operator fees, and the Financial Cost Adjustment (FCA) impact on Transmission and Distribution (T&D) losses for the fourth quarter of the fiscal year 2022-23.

NEPRA’s approved rate of Rs. 3.2814 per unit, effective from October 1, 2023, along with an 18% GST, is estimated to cost distribution companies (Discos’) consumers approximately Rs. 160 billion, equivalent to Rs. 3.87 per unit.

While specific details regarding the financial impact on K-Electric consumers were not disclosed by the government or NEPRA, an official source suggested it would be slightly over Rs. 40 billion, resulting in a total impact of over Rs. 200 billion.

This Quarterly Tariff Adjustment (QTA) is in addition to a previous increase of up to Rs. 7.5 per unit that took effect on July 1, 2023, with a financial impact of Rs. 890 billion, excluding the 18% GST and subsequent monthly fuel price adjustments.

A significant contributing factor to this additional quarterly expenditure, as indicated by Discos and the Power Division, is the 13% lower electricity consumption by Discos compared to the estimates used by relevant authorities when establishing reference rates. While the initial projection for electricity sales during the April-June 2023 period was 37,645 gigawatt hours (GWh), the actual figure stood at 32,661 GWh.