ISLAMABAD: The federal government has decided to continue with about an average of Rs2.35 per unit surcharges on electricity imposed in 2014 on all the electricity consumers.

The Ministry of Energy has made a formal request to the National Electric Power Regulatory Authority (Nepra) to allow three surcharges to continue in consumer tariff to ensure flow of more than Rs100 billion funds to meet debt servicing obligations of the power sector, subsidy to poor consumers to ensure countrywide uniform rate and investments required for expansion of power sector.

The three surcharges — tariff rationalisation surcharge, financing cost surcharge and Neelum-Jhelum surcharge — would not increase consumer tariff from the current level but would deprive them of a tariff reduction.

Rs100bn needed to meet debt service obligations

The financing cost and NJ surcharges would remain flat at 43 paisa and 10 paisa per unit, respectively, for all consumers while the tariff rationalisation surcharge, with an average of Rs1.82 per unit, would vary for each consumer category and distribution company based on system losses and other inefficiencies.

The surcharges were imposed by the government in March-April 2014 when the regulator determined reduction in tariff for all distribution companies by an average of Rs2.35 to 2.50 per unit. The surcharges faced legal challenges in courts but finally the regulator agreed to make them part of the tariff at the time.

Now, the government has sought the continuation of these surcharges as part of “re-determinations of tariff for Discos for the 2015-16” to block some discounts to the consumers.

Also, the regulator had held suo motu proceedings regarding periodical adjustments on account of power purchase price (including impact of T&D losses on monthly fuel cost adjustment) and prior year adjustment pertaining to the 2016-17.

In response, the government has filed a request under section 31 of the Act for inclusion of subsidy/surcharges in the schedule of tariff and desired that the regulator should reflect certain amounts of subsidy/surcharges for certain categories of consumers.

“Further, the federal government in exercise of its powers under section 31 (5) of Nepra Act 1997, has decided to impose the following surcharges,” Nepra said in a public notice.

This included Neelum-Jhelum surcharge imposed in 2008 that should be continued until June 2018 at the rate of 10 paisa per unit on all electricity consumers of Discos except lifeline domestic consumers.

The Neelum-Jhelum surcharge is collected, for the purposes of meeting a portion of the cost of construction of 969MW Neelum-Jhelum Hydropower Project. Collection of this surcharge shall be deposited by the Discos in the “Neelum-Jhelum Hydropower Project Fund”.

A surcharge at the rate of Rs0.43 per kWh on account of recovering the debt servicing applicable to all the consumer categories on per unit consumption except lifeline domestic consumers. This shall be considered as a cost incurred by the distribution company to be included in the tariff recommended by the regulator.

The financing cost surcharge shall enable smooth working and running of the power sector and to meet the repayment obligations of mark-up cost of loans obtained against the sovereign guarantees of the Government of Pakistan for the purpose of reducing shortfall in payment of determined and verified costs of power generation of various power generators.

The collection of the financing cost surcharge shall be deposited in “Financing Cost Fund” to be kept in the Escrow Account of the Central Power Purchasing Agency Guarantee Ltd for exclusive use for discharging the liabilities of the power producers.

The third surcharge namely “tariff Rationalization Surcharge” at the rate mentioned against each of the categories of electricity consumers in respect of each unit of electric power sold by the specified DISCO during each of the billing month shall be considered as a cost incurred by the distribution company to be included in the tariff.

This is to enable fulfilment of the parameters set in the power policy to achieve objectives like the socio economic objectives, the budgetary targets in field, protection of low end consumer from price escalation through provisions of subsidy and maintaining uniform tariff across the country.

The collection of the this surcharge shall be deposited by the companies in “Tariff Rationalisation Fund” to be kept in the Escrow Account of the Central Power Purchasing Agency Guarantee Ltd for exclusive use for discharging the liabilities of the power producers.