At a public hearing chaired by Nepra members Maqsood Anwar Khan, Amina Ahmad and Ghulamullah Shaikh, Central Power Purchasing Agency (CPPA) Chief Executive Officer Rehan Akhtar said the main reason behind the Rs2.52 per unit additional fuel cost adjustment (FCA) for July was the “highest-ever” purchase of RLNG cargoes from the spot market.
He attributed the increased spot purchases to the unavailability of contracted LNG cargoes from Qatar following the closure of the Strait of Hormuz.
Several participants also questioned power producers’ coal imports, particularly those made for the Port Qasim Power Plant, alleging that they were unnecessarily increasing the burden on consumers. They called on Nepra to ensure a fair and transparent mechanism for fuel procurement.
Industrial representatives, mostly from Karachi, reiterated their criticism of the industrial support package for incremental electricity consumption, saying it had failed to benefit most industries. They said the package was supposed to be reviewed after six months, but had remained unchanged for nine months.
The representatives also criticised the tariff rebasing implemented from Jan 1, arguing that lower benchmarks were set to reduce the budgeted subsidy, while subsequent increases in fuel costs had placed an additional Rs206bn burden on consumers through FCAs and quarterly tariff adjustments.
They said Nepra had directed the Power Division to review the incremental tariff package after consulting industrial consumers within six months, but claimed no such consultations had taken place.
Nepra Member Amina Ahmad said the Power Division had already submitted its review proposal but acknowledged that it was concerning to hear that industrial consumers had not been consulted.
She said the regulator would not entertain the review request in its current form and would return it to the Power Division unless the proposal was revised following comprehensive consultations with industry representatives.
Industrial consumers also questioned the export of furnace oil at subsidised rates while the government continued to impose a substantial petroleum levy on its domestic consumption.
They argued that there was little justification for exporting furnace oil when the price difference between RLNG and furnace oil stood at only around Rs3 per unit, even after accounting for the petroleum levy. They also called for petroleum levy collections on furnace oil to be used to lower industrial electricity tariffs, as previously announced by the prime minister.
Mr Akhtar said the proposal was valid and was currently under government consideration, but cautioned that implementing it would be difficult because of technical requirements linked to the IMF programme.
He said the unavailability of contracted LNG cargoes had forced the import of additional RLNG to meet the needs of major power plants in Punjab and maintain system stability. The shortfall had also been partly met through increased generation from imported coal.
Mr Akhtar added that the government’s decision to stagger refuelling at the Karachi Nuclear Power Plant (K-III) had also worked against consumers’ interests as circumstances had changed.
The 1,100MW K-III plant is now expected to resume full generation by Aug 31, instead of remaining offline from April 20 to June 20 under the original schedule.
The hearing was informed that the cost of RLNG-based electricity generation had surged to Rs47.4 per unit in July, more than double the previous month’s level, as expensive spot cargoes were arranged following the suspension of Qatari supplies amid the US-Iran conflict.
Mr Akhtar warned that the impact could become even more severe, as RLNG prices rose by nearly one-third in August. The increase would translate into an additional burden on consumers through electricity bills issued in October, he acknowledged.
Once approved, the July FCA would result in an additional charge of around Rs36.55bn to consumers of all power companies, including former Wapda distribution companies (Discos) and K-Electric, in their September bills.
