ISLAMABAD: The Government assured on Tuesday that the Winter Package, designed based on incremental consumption over three months at a rate of Rs 26.07 per unit, would be available to K-Electric (KE) customers on the same terms as those of power distribution companies (Discos). The package excludes solar (net metering) consumers and caps consumption increases at 25%.
This information was shared in government documents and during a public hearing, which was largely attended by industry representatives.
The subsidy-neutral package, which will be available from December 1, 2024, to February 28, 2025, is aimed at industrial, commercial, and domestic consumers (those using more than 200 units per month and Time-of-Use (ToU) users), as well as General Services. The package could be extended in different ways, depending on its success, according to a senior official from the Power Division.
Under the package, the historical consumption for FY 2024 or the last three years, whichever is higher, will be considered. Historical consumption will be calculated on a rolling basis as follows: (i) 50% for FY 2024, (ii) 30% for FY 2023, and (iii) 20% for FY 2022.
A representative from the Central Power Purchasing Agency-Guaranteed (CPPA-G) explained that only the positive Fuel Cost Adjustment (FCA) will be applied to incremental sales, and the Power Holding Limited (PHL) Debt Servicing Surcharge (DSS) will not apply to incremental consumption. The incremental package will be available for only up to 25% more than the reference benchmark consumption for each respective month. For ToU consumers, the total monthly consumption (both peak and off-peak) must exceed the reference benchmark consumption to be eligible for the package.
CPPA-G representatives noted that, based on previous packages, it is expected that all consumer categories will increase their consumption over the three months. The package is anticipated to be cheaper than LPG or RLNG-based space heating.
Several industry representatives—including Arif Bilwani, Tanveer Barry, Rehan Jawed, Engineer Abubakar, Aamir Sheikh, and Anil Mumtaz—expressed their views on the Winter Package, pointing out deficiencies and proposing amendments to maximize benefits for industrial consumers.
During the hearing, it was emphasized that a significant number of industrial consumers, particularly those with solar systems (net metering), should be included in the package, and the 25% cap on consumption growth should be removed.
However, CPPA-G representatives stated that net metering consumers are already receiving incentives, such as not paying capacity charges. Including them in the package would create a financial burden, and removing the 25% cap would similarly result in financial challenges.
The Chairman of NEPRA requested that interveners or consumer representatives send their views in writing to NEPRA’s Registrar, so that responses could be sought from the Power Division.
In response to a question, the government clarified that the Winter Package was finalized after extensive consultations and analyses using Plexos software and dispatch models provided by the National Power Control Centre (NPCC). Transmission system constraints identified by NPCC were incorporated into the marginal cost evaluation.
It was noted that the financial benefit to industrial consumers would range from Rs 5.72 to Rs 15.05 per unit, residential consumers would benefit from Rs 11.42 to Rs 26 per unit, commercial consumers would see savings of Rs 13.46 per unit, and General Services would receive Rs 20.8 per unit. Taxes would apply on top of these incremental rates.
Rehan Jawed challenged the claimed savings figures, suggesting that savings would likely be no more than Rs 4 or Rs 4.5 per unit. CPPA-G disagreed, arguing that the overall savings might be in that range, but for incremental consumption, the impact would be between Rs 5.72 and Rs 15.05 per unit. Jawed also proposed that the Power Division facilitate meetings between industry representatives and KE before finalizing such packages.
Tanveer Barry pointed out that the benefit of the previous Industrial Support Package had not been extended to industries in Karachi. He emphasized that this time, the incentive should be extended to Karachi’s industry on equal terms with Discos.
The Power Division explained that historically, implementing such initiatives for KE consumers had faced challenges due to KE’s tariff structure, as determined by NEPRA. This resulted in uneven application of the initiative across the country, which hindered its full impact. To address this, the government has directed NEPRA to establish a tariff adjustment mechanism for KE, ensuring that the initiative can be implemented without affecting KE’s distribution and profit margins.
KE’s CEO, Syed Moonis Abdullah Alvi, stated that the previous incremental package was based on units that had already been accounted for in KE’s tariff and cash flow. Therefore, passing on incremental gains to customers would result in revenue losses for KE, especially since the utility had not met the projected growth due to adverse macroeconomic conditions. He noted that KE had not been given any relief during the decline in sent-out figures due to COVID-19 in 2020, and it was expected that any gains or losses would be borne by KE.
In concluding the public hearing, the Additional Secretary-II of the Power Division, Syed Zakria Ali Shah, stated, “We, at the Ministry, have reviewed the package multiple times with all the relevant departments. After thorough evaluation, we have finalized it in this form to ensure maximum benefit for the largest number of people. If this package is successful, it will be extended in different ways.”
