Pakistan power firm allowed to hike fixed, variable tariff

ISLAMABAD — The cash starved Pakistan's premier power company — Water and Power Development Authority (WAPDA) — has been allowed 15 per cent and 8 per cent increase in fixed and variable tariff respectively on its hydropower units with immediate effect by the National Electric Power Regulatory Authority (Nepra).

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Published: Tue 3 Jul 2007, 8:45 AM

Last updated: Sat 4 Apr 2015, 10:11 PM

The Wapda Hydel through a petition had sought an increase of more than 23 per cent in both components of the tariff for bulk sale to Central Power Purchasing Agency (CPPA), which was rejected by the Nepra. The representative commercial and industrial associations like All Pakistan Textile Manufacturing Association (APTMA), Pakistan Federation of Chamber of Commerce and Industry (FPCCI) and Karachi Chamber of Commerce and Industry (KCCI) had opposed the tariff increase and had demanded improved service and efficiency of the electricity system.

With the decision, the Wapda Hydel would now charge a fixed rate of Rs265.96 per kilowatt per month instead of Rs231.59 as capacity payment, up by 14.84 per cent or Rs34.37 per KW per month from the CPPA. The Wapda's Hydel would also charge a variable charge of 30.87 paisa per unit (kWh) instead of 28.63 paisa, which is higher by 7.8 per cent or 2.24 paisa per unit. The CPPA procures electricity from Wapda's hydel and thermal entities and then sells to consumers through various distribution companies. With an installed capacity of about 6,444MW, the Wapda Hydel accounts for almost 57 per cent of the Wapda's 11,363MW total installed capacity and 33 per cent of the country's entire generation capacity. Wapda has been unbundled into 13 corporate companies under its corporatisation plan.

According to an official announcement, under the separate tariff system introduced for different Wapda entities in February this year, the Nepra approves tariffs for the CPPA to purchase electricity from Wapda Hydel and Wapda thermal entities. In the second step, Nepra determines tariff for distribution companies to purchase electricity from the CPPA. In the third stage, the consumer tariff is fixed that also involves operation and maintenance costs of distribution companies and the transmission company and their system losses. The consumer tariff is to be revised in July and January every year.

Separately, the Nepra has also increased capacity purchase tariff of Central Power Generation Company Limited (CPGCL) and Northern Power Generation Company Limited (NGPCL) — both thermal companies of Wapda — by about four per cent and two per cent respectively with immediate effect.

The Nepra has, however, rejected Wapda's request seeking blanket indexation mechanism by the utility itself, instead of annual reviews by the regulator, to cater for changing needs of the utility. On this account, the Nepra held that many capital expenditures required to be examined by it in the absence of an independent audit and hence " there is no justification for providing an indexation mechanism".

These increases would form part of the consumer tariff when the government takes a decision to revise the rates for distribution companies. More importantly, the net hydel payments to the NWFP for the year 2007-08 have been approved by the Nepra at existing Rs6 billion mark as an interim arrangement, notwithstanding Rs75 billion demanded by the province under an award of the independent arbitral tribunal. Since the case is pending before the Supreme Court of Pakistan, the Nepra held that a revised tariff would be required on the basis NWFP's demand when a final decision of the apex court is available.

The Nepra has also decided to appoint an independent auditor to examine different financing instruments of the Wapda like sale and lease back recently introduced in the name of Islamic financing Ijara' for Mangla hydel power plant to see if it was an operating lease or a fixed asset because both the banking jargons have different connotations.

The regulator also approved 10 per cent rate of inflation for fiscal year 2008 against government's next year inflation target of 6.5 per cent. It also approved 15 per cent rise in salaries as part of operation and maintenance cost.

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