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Nepra reserves decision on petition for hike in base tariff by Re0.95/unit

  • January 25, 2022

ISLAMABAD – National Electric Power Regulatory Authority has reserved judgment on the petition of the federal government for the increase in base electricity tariff by Re0.95 per unit.

In a public hearing, presided over by Chairman NEPRA Tauseef H Farooqi, to approve Policy Guidelines under section 31 of Regulation, Generation, Transmission and Distribution of Electric Power Act, 1997 for Retargeting of Power Sector Subsidies Phase –II, the regulator pointed out that provision of subsidy is the mandate of government of Pakistan. 

The federal government has filed petition before Nepra to approve policy guidelines to withdraw Rs 20b in phase-II of subsidy reduction plan. In first phase, government had also split different slabs by creating new ones to reduce subsidy for power consumers. In this phase, the government had withdrawn Rs 42b subsidy per annum. The government had removed around 8 million power consumers from subsidy net by reducing volume from 22 million to 13.9 million consumers.

Now, under second phase of reducing subsidy, the government was going to remove more consumers from power subsidy network by withdrawing Rs 20bn per annum subsidy. Official of the Power Division informed hearing that currently the government is providing Rs 238b subsidy to power consumers. The non-protected consumers are getting Rs 197b subsidy and the government wants to bring a reduction of Rs 20b in it. The protected consumers are getting Rs71b subsidy, he added.

Member Nepra Sindh, Rafiq Ahmad Sheikh noted that for the consumers using more than 300 units electricity, the increase is Re 0.95/unit while for the consumers using less than 300 units the increase is up to Re 0.48/unit. 

The regulator said that the Ministry of Energy (Power Division) had devised subsidy reform program, approved by the ECC of the Cabinet, to be applied in three phases, after approval of NEPRA.

Power regulator had approved first phase and notified with effect from October 1, 2021.Under this program, power regulator expanded definition of lifeline consumers. It approved new category of protected consumers having consumption upto 200 units consistently for six months.

Earlier under the Phase-I, the regulator had approved breaking the 301-700 slab into four slabs — 301-400, 401-500, 501-600 601-700. Each of these slabs continue to get the previous slab benefit of 300 kWh slab.

Now Ministry of Energy in a category of Phase-II requested for reduction in total net subsidy and removal of previous slab benefit, wherein following increase has been proposed in un-protected tariff categories and no increase has been proposed for the protected consumers. It proposed increase in tariff by Re 0.95 per unit in category of a under phase-11. Under the Re-Targeting of Power Sector Subsidies Phase –II, the federal government plans to withdraw Rs 20b annual subsidy from unprotected residential consumers. The decision to withdraw subsidy will result in hiking the base tariff by upto Re 0.95/unit from February 1. However, the average increase in base tariff will be Re 0.53/unit.

In a petition submitted to National Electric Power Regulatory Authority, for the policy guidelines for re-targeting the power sector subsidies phase-II, the Ministry of Energy had sought the regulator nod for removal of one slab benefit (Incremental Block Tariff). It also sought incorporation of revised subsidy and inter distribution companies tariff rationalization/cross subsidies through modification/adjustments in the Discos SoT as well uniform SoT as was determined by the regulator. 

The Phase-I provided expanded definition of lifeline consumers, creation of new categories of consumers (protected and unprotected) and restructuring of 301-700 units slab without changing effective tariff. As per the petition for phase-II, for the protected residential consumers using upto 200 units/month there will be no change in base tariff.

However, for the unprotected consumers using 1 to 700 units/month, the tariff will go up from Re 0.08/unit to Re 0.95/unit. For the unprotected consumers using 1-100 units, the increase will be Re 0.08/unit, for 101-200 it will be Re0.18/unit, for 201-300 the hike will be Re0.48/unit and for the categories using 301 to 700 units the per unit increase will be Re0.95/unit. 

The decision will take the base tariff of the consumers using up to 100 units from the existing Rs 9.42 to Rs 9.50/unit, of 101-200 units from Rs10.18 to Rs 10.36/unit, of 201-300 from Rs 12.14 to Rs 12.62/unit, for the consumers with 301 to 400 units from Rs 14.78 to 15.75/unit, for 401 to 500 units from Rs 16.24 to Rs 17.19/unit, for 501 to 600 units from Rs 17.16 tp Rs 18.11/unit, and for 601 to 700 units  it will increase from the existing Rs 17.80 to Rs 18.75/unit.

For the consumers using above 700 units, there will be no change and the base tariff would remain at Rs 22.22 per unit. As per the petition, the Phase II of the subsidy reforms entails gradual reduction in total net subsidy for unprotected residential consumers, reduction in cross-subsidy and removal of previous slab benefit. NEPRA has reserved the judgment and the decision in this regard will be issued later.

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