The government has asked Nepra to increase the FCA by Rs3.5 per unit for April to generate revenue of over Rs29 billion from electricity consumers. This increase has been requested by the Central Power Purchasing Agency(CPPA) despite 75% of the power supply being generated from cheaper local fuels in April. The CPPA’s petition is concerned about a proposed FCA of Rs3. Rs 4883 per KWh above the reference tariff of Rs 5. 492 per unit already charged in April. This proposed adjustment is 64% higher than the pre-fixed fuel cost and poses questions on the power sector’s ability to accurately fix fuel costs.
In recent months the FCAs have varied between 50 and 115 per cent above the prescribed fuel cost, on top of an already increased base tariff of 26 percent annually and a 10 percent quarterly tariff adjustment. As a result, consumers are subjected to rising electricity bills as they consume more electricity amidst the rising temperatures. The higher FCA has been attributed to factors such as reduced avaliabilty of hydropower, increase in domestic coal and gas prices and greater reliance on LNG. CPPA’s petition adds that 8,639 GWh of electricity was generated in April at an estimated fuel expenditure of Rs79. 56 billion (Rs9. 21 per unit). Of this, 8,375 GWh were transmitted to Discos at Rs75. 2 billion (Rs8. 98 per unit).
This included a 14% drop in electricity use in April compared to the same period in 2013 due to lower temperatures, economic slowdown and consumers switching to alternative sources. The Rs3. The FCA for 5 per unit for the month of April is also higher than the Rs2 per unit for April of the previous year. LNG-based power generation contributed the highest amount of 25% to the national grid in April followed by hydropower and nuclear power each at 24%. Other power sources that also participated to some extent include local gas and coal-based generation as well as wind, bagasse, and solar power. 3%.
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Nepra has fixed May 30 for public hearing on the FCA request. If the higher FCA is approved, consumers will receive higher electricity bills in June, thus increasing their monthly electric bills.