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Economy

NEPRA Agrees On tariff relief for K-Electric consumers

Users will get relief of Rs2.3b due to tariff reduction on account of fuel cost adjustments

ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) has approved a relief in electricity rates on account of fuel cost adjustments for the consumers of K-Electric.

The consumers will get a relief of Rs2.3 billion due to reduction in electricity rates on account of fuel cost adjustments. Nepra, in a statement, said that the authority had approved a total negative impact of Rs2,355 million on account of fuel cost adjustments (FCA), to be made in the billing months of March, April and May 2021 and would be applicable to all consumer categories, except for lifeline consumers. The negative FCA will not be applicable to the domestic consumers utilising up to 300 units and agricultural consumers of K-Electric.

K-Electric had requested monthly FCA from July 2019 to May 2020, which would have a total negative impact of Rs1,480 million.

The impact of fuel cost adjustment for the period July 2019 to May 2020, as determined by Nepra, ranges from an increase of Rs1.2 per unit to a decrease of Rs2.13 per unit.

As such, the net per unit impact on the consumers remains negative and they will get relief based on their consumption patterns. This will be in line with the mechanism given in K-Electric’s multi-year tariff whereby changes in fuel prices, generation and power purchase mix are passed through along with certain annual adjustments.

The negative adjustment for April to June 2020 is mainly attributable to lower fuel prices, which dropped due to Covid-19, followed by a gradual increase in the second half of the year.

Furnace oil prices dropped from Rs57,000 per ton in March 2020 to Rs35,000 per ton in May 2020 and then increased to Rs55,000 per ton during July-December 2020.

Similarly, re-gasified liquefied natural gas (RLNG) prices dropped from Rs1,800 per million British thermal units (mmbtu) in March 2020 to Rs1,040 per mmbtu in June 2020, and then increased to Rs1,300 per mmbtu in December 2020. It is important to note that K-Electric has already incurred these costs and has paid the costs to fuel suppliers and for external power purchases.

The monthly FCA requests for June to December 2020 amount to Rs3.9 billion, out of which Rs3.2 billion will be passed on to consumers and the remaining will become part of quarterly adjustments as per the given mechanism for transmission and distribution losses and non-passing of negative FCA to certain consumer categories.

The increase in FCA mainly relates to the gas infrastructure development cess being billed by Sui Southern Gas Company, with impact of around Rs2.9 billion, as well as the increase in fuel prices after Covid-19 and higher proportion of RLNG being billed due to unavailability of natural gas.

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