Nepra orders Discos to file tariff petitions

ISLAMABAD: Expressing serious displeasure over statutory violations, the National Electric Power Regulatory Authority (Nepra) has directed the distribution companies of ex-Wapda to file two annual tariff petitions immediately to pass on lower electricity rates to consumers.

The power regulator highlighted that distribution companies were required under the statutory orders to file annual tariff petitions for each fiscal year before Jan 31, but this obligation had not been fulfilled for two years now.

A senior official said the distribution companies had in fact secured stay orders from the Islamabad High Court against Nepra’s previous determinations that entailed reduction in base electricity tariff, ranging between Rs2-3 per unit for various consumer categories. This had an estimated revenue impact of Rs228 billion that should have gone to the consumers through tariff reduction.

Therefore, the companies did not file fresh annual tariff petitions because this could have a series of legal and financial ramifications. This was the major reason behind reduction in tariff differential subsidy that used to be injected out of federal budget at the rate of Rs20bn per month in the past.

In a letter sent to chief executive officers of six distribution companies — Hyderabad, Sukkur, Peshawar, Gujranwala, Multan and Quetta — and the secretary water and power, the regulator said that as per Consumer End Tariff (Methodology and Process) 2015, these Discos were required to file tariff petitions by Jan 31 for determination of their consumer end tariff pertaining to the following financial year.

Non-filing earns these power distribution companies a windfall of Rs228bn annually
“Accordingly, for determination of consumer end tariff for 2016-17, the petitions should have been filed by Jan 31, 2016,” the regulator said and regretted that “even the time line for filing of tariff petition for 2017-18 has lapsed”.

Nepra pointed out that none of the distribution companies of former Wadpa, excluding Lesco, Iesco and Fesco which were under the Multi Year Tariff (MYT) regime filed their tariff petitions within the prescribed time line.

Tesco, Sepco and Hesco subsequently filed their tariff petitions for 2016-17. However, only Tesco’s petition had been admitted and the other two were returned being incomplete.

“In view thereof, you are directed to file your consumer end tariff petition pertaining to 2016-17 and 2017-18 simultaneously or for a longer period under a MYT regime,” the Nepra order stated.

In a rare move last year, the Ministry of Water and Power facilitated its power distribution companies to approach the Islamabad High Court, seeking a stay order against tariff determinations issued by the power regulator, that entailed a Rs2-3 per unit (kwh) reduction in average tariff, involving a total amount of Rs227bn. The court issued the stay order.

These utilities adopted the judicial route after exhausting all avenues (seeking review and reconsideration applications) available in the Nepra law, but failing to convince the regulator to pass on, to the paying consumers, the higher impact of system losses, inefficiencies and theft.

Under the Nepra law, the government is required to seek review of tariff determination based on any fresh ground, or in case a critical element is missed out by the regulator within 15 days, or else notify the tariff. After Nepra rejected review and reconsideration petitions, the government, instead of notifying the tariff for 2015-16, decided to take the route of the Islamabad High Court.

On the basis of various benchmarks set many years ago in consultation with the power companies, the Nepra determination entailed a yearly relief of Rs105bn on account of the fuel cost of power generation and about Rs123bn on account of less recovery, theft and losses. This meant the paying consumers had been denied a monthly relief of about Rs19bn.

Nepra had taken strength from a series of Supreme Court judgements that limited the scope of the power regulator to follow the government directives of keeping the tariff on the higher side. In the famous case of Rental Power Plants, the apex court had ordered that the regulator was not bound to follow government instructions against the law and it should pass on only fair and prudent costs of electricity to the consumers.

The crux of the judgement was that consumers paying their bills should not be made to bear the burden of those who do not pay, theft, or inefficiencies, because it was the responsibility of the power companies to ensure full recoveries and control theft and losses.

The government prepared a template case for all the distribution companies and contended, before the high court, that it was following a uniform tariff regime across the country despite ten different tariffs being determined by Nepra for ten different Discos, in order to cater to the socio-economic necessities of the country and to have access to affordable energy for the purposes of economic growth and development.

The government also contended that Nepra’s tariff determinations were a mere recommendation because it was the government that had to notify the tariff of the most efficient power company for all consumers, and on the basis of that provide subsidy to other inefficient companies to keep the tariff uniform.

“If the revenue stream of the Discos is not so supplemented by subsidy, it will adversely impact the ability of the Discos to fulfil their liabilities towards power sector entities and power generation companies — which in turn will lead to increased power outages and load-shedding — since a financial shortfall in the sector will impact the entire power sector’s physical infrastructure, from generation to transmission to distribution”, the government maintains.

The Nepra, however, held that the burden of non-paying consumers, beyond a certain level, could not be passed on to the paying consumers, therefore, the margin for non-recoveries in the tariff could not be allowed or else it would be in violation of the Supreme Court orders.

Source: Dawn