ISLAMABAD: The cost of producing electricity in the country has become more expensive by more than 50 percent – Rs 6.4653 per unit in August 2021 compared to Rs 4.2928 per unit in August 2020, which is passed on to consumers under the guise of the monthly fuel price adjustment (FCA).
Electricity is delivered to consumers after adding billions of rupees on behalf of additional charges / prior adjustments. Sometimes Nepra, the regulator, allows the requested adjustment but sometimes denies certain costs, especially those included in violating the order of economic merit (EMO).
This essential increase is in addition to the increase of Rs 1.95 per unit and Paisa 22 per unit and quarterly adjustments. The current government has increased electricity tariffs by more than 30% during its three-year tenure.
In 2018, the average national tariff was Rs 13.92 per unit without the hefty taxes and surcharges, which has now reached Rs 15.54 per unit. Inefficiencies and losses in the electricity sector are also passed on to consumers.
All-time high energy generation
A comparison of the fuel cost of August 2021 with the corresponding month of 2020, shows a 50.6% increase in FCA.
Official figures show that the price of electricity produced from coal rose 33.4% to Rs 8.4101 per unit in August 2021, from Rs 6.3039 per unit in August 2020. The cost of production of high speed diesel (HSD) increased by 4.6. percent to Rs 19.3422 per unit of Rs 18.4835 per unit.
Electricity production (cost) increases
Data prepared by the Central Power Purchasing Agency Guaranteed (CPPA-G), the cost of producing residual fuel oil (RFO), i.e. heating oil, has been increased by 23% to Rs17.0783 per unit in August 2021 against Rs13.9013 per unit. unit in August 2020. The most exorbitant increase was seen in the cost of producing electricity produced from RLNG – an increase of 76% – to Rs12.0604 per unit compared to Rs6.8534 per unit in August 2020. The main reason for the inflated cost is an expensive cash purchase of LNG.
According to the data, the cost of producing electricity produced from natural gas showed a growth of 16.4% to Rs 8.1720 per unit from Rs 7.0172 per unit. The cost of producing electricity produced from nuclear power plants was a growth of 4 percent, electricity imported from Iran, Rs 0.82 percent. However, no change was reported in the electricity produced from bagasse.
Nepra publishes two electricity tariff determinations
An analysis of data from August 2018 with August 2021, shows an average increase of 16.5% in the cost of production, of which coal was 31%, HSD, 10.6%, RFO 18%, natural gas 64%, RLNG 16 percent, nuclear 4.6 percent, import from Iran Rs 0.80 percent. The cost of blended energy, purchased from smaller projects, and bagasse has fallen in three years.
Electricity prices have been reduced in some months based on the cost of production over the past three years and reimbursement has been given to domestic consumers, who have used more than 300 units. Lifeline consumers, who use up to 300 units in a month, have not been eligible for refunds.
Today the government has already approved a subsidy rationalization plan, which can also be ratified by Nepra, very soon, which aims to change the definition of lifeline consumers. The government wants to reduce the number of lifeline consumers by changing the definition that if a consumer even uses a unit of more than 200 units in a month of the year, he will be deprived of that facility for at least six months.
Copyright Business Recorder, 2021