ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) has taken strong notice of secretly passing on to consumers the mark-up paid to fuel suppliers by power companies and said it will not allow the penalizing of poor consumers for power sector’s inefficiencies or political compulsions.
“It is criminal negligence, which cannot be overlooked,” remarked Nepra’s member from NWFP Shaukat Ali Kundi while hearing on Wednesday a request for the Central Power Purchase Agency (CPPA) – a corporate entity under the Pakistan Electric Power Company (Pepco) – to enhance electricity tariff by Rs1.44 per unit on account of fuel adjustment with effect from April 1, 2010.
Nepra also strongly criticised the ministry of finance for not attending the hearing, whereas it should have explained reasons for accumulation of the circular debt and the government measures for solving the problem.
“They don’t even bother to depute a representative for the hearing although they had been specifically asked in writing to attend to such an important subject that would impact the people belonging to every walk of life,” Nepra member Maqbool Khawaja said.
An inquiry conducted by Nepra revealed that the CPPA wanted to clandestinely charge about Rs800 million as mark-up paid to fuel suppliers during the January-February period, resulting in about 43 paisa per unit impact in the consumer tariff without providing its details in the tariff petition.
The CPPA representatives confirmed the mark-up payments but said these were contractual obligations under power purchase agreements because of over Rs180 billion inter-corporate circular debt and political compulsions of the government.
He said that since the government did not allow power companies to recover the full cost of power supply in the past, the circular debt had accumulated and the power companies had to pay late payment surcharge to the private companies and fuel suppliers.
“Whatever may be the reasons but it should not be taken as granted that the mark-up (on delayed payments) has to be passed on to consumers. This is not fair that you put mark-up in invoices secretly,” said Mr Khawaja, the Nepra member from Sindh, who presided over the public hearing.
“Let it be known and clear that Nepra would not allow consumers to suffer because of inefficiencies of certain entities or political compulsions of the government,” he said.
Nepra’s major concern was that it had to face severe public criticism for continuously allowing tariff increases and resultant strict scrutiny of its determinations by the superior judiciary, the National Assembly and parliamentary committees.
“The people are protesting and newspapers are full of critical articles,” a participant said.
Nepra has received six notices from the Lahore High Court over the past few days on petitions filed by consumers challenging Rs1.02 paisa per unit increase allowed early this month. “We will have to justify every paisa that we allow in the tariff increase. We cannot hide anything from the court. Let it be recorded that we are very unhappy over the way of presenting invoices without details,” said Mr Khawaja.
When representatives of the CPPA insisted that the circular debt and the mark-up payments should be accepted as fact of life for being contractual obligations, Mr Khawaja said the consumers should not be forced to pay for the default of any agency or failure of the companies to reduce system losses and theft.
He said the CPPA’s argument meant an admission that everyone had failed to deliver and hence the general public should pay the price. Nepra, he said, wanted the system to function but not at the cost of your inefficiencies and the government’s political considerations.
The CPPA said the diesel-based electricity cost Rs15.4 per unit and the power companies had to produce 1.3 per cent of total power generated in February against the original estimate of 0.3 per cent share. Likewise, the cost of power generation from furnace oil stood at about Rs5.10 per unit and its share in the energy mix had also increased to 45 per cent from 42 per cent. It said a slight reduction in hydropower and gas-based power generation also affected the power production cost.
An intervenor Javed Iqbal from Ittihad Chemicals – the manufacturers of caustic soda and chlorine products – said that an increase of one rupee in electricity tariff meant Rs3000 per ton increase in the cost of caustic soda production and as result the company’s profit of Rs700 million in August had turned negative and the company would have to be closed down in a month. He said the increase in power tariff was making it impossible for chemical companies to recover the cost from consumers and that had not only put at stake the future of 1000 employees working for caustic soda producers but was also increasing the production cost of a host of industries.
Nepra sought documentary evidence of the fuel cost, mark-up and bonuses being paid to the private power companies and fuel suppliers before finalising tariff determination next week.
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