ISLAMABAD : The National Electric Power Regulatory Authority (NEPRA) is set to approve a tariff adjustment mechanism for the implementation of the Winter Package in K-Electric, ensuring that the distribution and profit margins remain unaffected, sources informed NewzShewz.
The regulator will hold an online public hearing on November 26, 2027, to review the subsidy-neutral, three-month (December 24 to February 25) Winter Package and approve it without delving into further details.
The International Monetary Fund (IMF) has also given its nod after interaction with the Finance and Power Divisions top bureaucracy as the purpose of package is to increase electricity consumption in winter months.
On November 19, 2024, the Power Division informed the Economic Coordination Committee (ECC) of the Cabinet that the recent surge in electricity tariffs, coupled with challenging economic conditions, has led to reduced demand across various consumer categories. During the winter months of FY 2023, demand decreased by 6%, with an additional 8% reduction in FY 2024. Furthermore, the average winter demand for FY 2024 remained 11,196 MW lower compared to the summer months, indicating ample reserves in the system to meet any potential increase in demand during winter.
Given these circumstances, the Power Division was directed to implement a subsidy-neutral interim relief initiative to support electricity consumption nationwide. A similar initiative, the “Use More, Pay Less” Package, was introduced during FY 2020, offering a discount on incremental consumption from November 2019 to February 2020, which resulted in a 16% growth in demand (including other factors).
Additionally, an Industrial Support Package (ISP) was introduced for FY 2021-23 and the first four months of FY 2024 (July-October) to boost industrial activity. The ISP contributed to demand growth of 15%, 14%, -8%, and -2% in FY 2021, 2022, 2023, and (July-Oct) 2024, respectively, for the industrial sector. Any increase in electricity demand during winter will not only enable optimum use of the system’s generation capacity but will also help reduce gas demand by shifting favorable demand towards electricity.
In light of this, a Winter Demand Initiative was proposed for industrial, domestic (ToU and non-ToU consumers exceeding 200 units), commercial, and general services consumers of Discos and K-Electric. The general provisions of the initiative are as follows: ;(i) tariff of 26.07 Rs/kWh shall be charged to all eligible consumers on the respective incremental consumption, above the benchmark consumption in the corresponding months ; (ii) the initiative shall remain applicable for a three-month billing period effective from December 24 to February 25;(iii) the benchmark consumption shall be the higher of either the relevant month’s consumption in FY 2024 or the historical consumption over the past 3 years for the relevant months, based on the formula provided in summary ; and (iii) the initiative is subsidy neutral.
The Power Division further informed that the implementation of the winter Demand Initiative for FY 2025 requires additional RLNG allocation to the power sector. The Petroleum Division, in a meeting with the Power Division agreed in principle to provide the necessary incremental RLNG, to meet the incremental demand for the winter demand initiative FY 2025.
It was mentioned that the proposed tariff will increase in the event of non-supply of incremental RLNG. Historically the implementation of similar initiatives for consumers of K-Electric faced challenges on account of the applicable tariff structure of KE determined by NEPRA and resulted in non-uniform application of the initiative across the country ultimately hindering the full realization of the initiative’s intended impact.
The Power Division submitted following proposals for consideration ;(i) issuance of guidelines to NEPRA for approval of proposed initiative and incorporation in the regulatory framework;(ii) direction to NEPRA to establish a tariff adjustment mechanism for implementation of initiative for K-Electric without impacting the distribution and profit margin ;(iii) provision for RLNG allocation from the Petroleum Division to meet incremental demand. The decision of the ECC has already been ratified by the federal cabinet, allowing Power Division to seek NEPRA’s nod on Winter Package.
CEO, KE, Syed Moonis Alvi in his letter of October 30, 2024 to Power Division had recommended that incremental sales under current package are excluded from the sales of KE / DISCOs for the purpose of assessment of recovery of annual revenue requirement in tariff to ensure that annual / quarterly revenue requirement of KE / Discos, as determined by NEPRA, is met through the sales excluding incremental units under current package.
He maintained that for the purpose of exclusion, adjustment to be made at the level of allowed loss targets as approved in the tariff determination for Disco / KE. Further, adjustment on company-wise T&D losses is important to ensure that there are no adverse implications for KE / Discos due to the change in sales mix which may arise as a result of the exclusion of incremental sales. This would align the mechanism followed in case of Discos and will result in no gain / no loss scenario for KE, enabling KE to roll out the package.
He requested that his recommendations be included in the package as the benefit of the previous incremental package could not be passed on to consumers due to the inconsistency between the package proposed and KE’s MYT. He also endorsed the recommendations of Korangi Association with respect incremental package. Ends
