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Power rates may go up 3pc in Pakistan

Total increase as estimated by the Water and Power Development Authority (Wapda) authorities should not be less than 45 paisa per unit since furnace oil prices have increased from Rs10,371 per tonne on December 16 to Rs15,575 per tonne as of now, a Wapda official said.

But the National Electric Power Regulatory Authority (Nepra) can not pass on the impact of fuel oil price to end-consumers more than 3 per cent of the total average tariff under the existing rules, a senior Nepra official said.

The official said that in case the impact of fuel oil was higher than 3 per cent, the Nepra is required to stagger it over to the next quarterly review. "This is really a quandary for both the government and Wapda," said the Nepra official.

The Wapda official said that fuel prices were out of utility's control and it could not bear the additional burden at its own. "Wapda is entitled to pass on the full burden of fuel oil to the consumers under the automatic tariff adjustment formula approved by the Nepra although Wapda has been objecting to it," said the official.

Wapda sources said that the government would have to share the additional burden because the fuel prices were still going up in the international market and Wapda's fuel-based burden could not be put off for another three months.

He said that Wapda's fuel expenditure since December last year was already touching Rs20 billion and could even cross Rs30 billion if the price trend continued in the furnace oil sector.

Nepra source said the government would have to take a decision whether or not to pass on the full impact of fuel rates to the consumer and then amendment to the relevant rules would not be a problem.

Wapda chairman Zulfiqar Ali Khan has already taken up the matter with the ministry of finance.

Under international donor pressure to meet certain financial targets, Khan had told the finance ministry last month that more than 40 paisa per unit increase in power tariff would unavoidable if it was not provided budgetary support of around Rs17 billion.

Wapda believes that since the new political government was not in favour of increase in electricity price as required to offset the additional burden, the federal government should make arrangements to take responsibility of the financial gap.

The furnace oil is a pass through item in the Wapda tariff which is revised quarterly by National Electric Power Regulatory Authority (Nepra) on the basis of international prices.

Nepra had reduced Wapda tariff by 12 to 19 paisa per unit in December as a result of reduction in international oil prices.

The Nepra determination had taken furnace oil at Rs11,406 per tonne on October 2, 2002, to Rs10,437 per tonne on December 16, 2002. Since then, the furnace oil rate has increased by around Rs5,500 per tonne and is expected to go up further for another time before the quarterly review due on March 16.

A Rs1,000 per tonne increase in furnace oil price has a revenue impact of Rs3.5 billion on Wapda over a period of three months and required an average 15 paisa per unit increase in consumer tariff.