Nepra proposal to hike KESC tariff turns down

On examination of accounts the Nepra rather found out that the consumer tariff actually required to be reduced by about four paisa per unit. The consumer tariff was, however, kept unchanged because of a nominal difference that would be adjusted in the next quarterly tariff revision.

Under the sales agreement with Kesc's new management, the power tariff for consumers in Karachi is subject to adjustment every three months to compensate for variation in the fuel price and cost power purchased and every year in July for indexation due to inflation.

The Kesc has submitted a tariff adjustment request on January 25 this year for variation in fuel price and cost of power purchase for the quarter October-December 2006. The Kesc had stated that variation in fuel cost due and generation mix amounted to Rs858 million or 8.58 paisa per unit. Similarly, the variation in cost of power purchased worked out to be Rs1300 million or paisa 13 per unit. As such, the combined effect of the two heads was calculated by the KESC at Rs21.57 per unit. The Nepra in its determination a few days ago said there was a leftover amount of Rs1768 million at the end of July-September 2006 period on account of fuel price variation and there was no leftover amount on account of power purchase cost. After accounting for the leftover balance of Rs1768 million, the required adjustment on account of fuel price variation works out at paisa 9.10 per unit and paisa 13 per unit on account of power purchase cost variation. "The combined effect thus works out as decrease in tariff by paisa 3.90 per kwh)", the Nepra said.

According to the prescribed mechanism, the maximum adjustment that can be allowed in a quarter due to variation in fuel price is 2.5 per cent and due to variation in power purchase price is 1.5 per cent of average sale rate.

Therefore, the allowable adjustment on account of variation in fuel price works out as increase in tariff by 9.10 paisa per unit and on account of power purchase cost as decrease in tariff by 9.57 per unit. "The combined (net) effect thus works out as decrease in KESC's consumer end tariff by 0.47 paisa per unit", the Nepra said, adding the negative balance of Rs390 million on account of power purchase cost after making necessary adjustment for the quarter (October-December 2006) shall however be adjusted in the next quarter.

"As the required decrease in Kesc's tariff is not significant i.e. less than paisa one per unit, the Nepra has decided not to alter the existing tariff for this quarter and pass on the required adjustment to the next quarter", the Nepra concluded.

Much before the privatisation of Kesc in November 2005, the government had put in place a multi-year tariff for the Kesc to attract private investors to purchase the company that envisaged quarterly adjustments for fuel prices either on account of its own plants or that of independent power producers and also required annual adjustments on account of inflation as pass through items to the consumers.