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Inflated electricity bills

For a good 68 percent of the population that has access to electricity in Pakistan, the monthly electricity bill has been full of surprises. They find it difficult to comprehend the exorbitantly high electricity bills. In addition to charges on account of the actual units consumed, the consumer is burdened with ever increasing government charges with additions of new items, mostly suspicious and ad hoc.

Largely, these add-on are on account of the fact that electricity supply companies in Pakistan are infected with incompetence, negligence and poor governance. Conveniently, all of the losses arising out of it are passed on to the consumer who pays for the incompetence and mismanagement of our electricity utility companies in the form of over-billing.

Most of the consumers pay their electricity bills without paying too much heed nor challenging the various figures related to electricity consumption and tariffs. Their focus is on the amount as per the electricity bill and the due date to avoid any penalty without paying attention as to how the bill has been calculated and whether the consumption represents a realistic picture of the electricity usage. A typical electricity bill comprises of (1) electricity consumption; (2) taxes; and (3) Other costs inclusive of fuel price adjustments, PTV fee, arrears if any, electricity duty levied by provincial government and similar.

This non-responsive attitude of the consumers is a grave mistake. It has provided the government an easy way out of its responsibility to fix the complex issues prevailing in the electricity supply chain.

It is widely reported that recently the government-owned distribution companies (Discos) are charging consumers double the fuel cost of electricity as advance billing and refunding only half of the overcharged amount on the regulator’s orders, thus earning a windfall revenue of more than Rs 120 billion annually.

This was disclosed at a public hearing this week when the National Electric Power Regulatory Authority (Nepra) ordered the state-run Discos to refund Rs 20 billion to consumers at the rate of Rs 1.71 per unit for overcharging them in July. The refund would be adjusted in the upcoming billing month.

Discos are reportedly charging significantly higher estimated fuel cost to consumers. The estimated cost is later adjusted against the actual cost in a subsequent month with the approval of the power regulator. The practice helps power companies generate billions of rupees from consumers in advance and have better cash flows without financing costs at the expense of the consumer.

These adjustments and relief in electricity rates are not be applicable to agricultural consumers and residential users with less than 300 units of monthly consumption. The rationale for this is that these categories are already being provided with subsidized electricity. Around 67-70 percent of consumers belongs to the segment consuming less than 300 units per month.

The power generation continues to be expensive to the consumers in spite of some changes in the fuel mix. Hydropower sector was originally estimated to contribute 41pc share, followed by furnace oil-based generation contributing 34pc. The share of hydropower stood at 30pc and that of furnace oil at 26pc, Re-gasified liquefied natural gas (RLNG) share was 12.2 percent, coal share 3 percent, nuclear power generation at 6 percent, HSD generation at 2.7 percent, natural gas-based generation stood at 17.17 percent, whereas, wind and solar plants together contributed about 2.3 percent.

The per unit cost of furnace-based power plants worked out to be Rs 9.36 per unit, natural gas at Rs 4.36 per unit, LNG at Rs 7.52 per unit, Coal at Rs 4.3 per unit, High Speed Diesel generation at Rs 14 per unit.

The Central Power Procurement Agency (CPPA) reported that energy was generated at a total cost of Rs 58.65 billion or Rs 4.69 per unit while 1.73 percent lower supply was delivered to Discos at a cost of Rs 58.69 billion or Rs 4 per unit. The difference between the tariff charged to consumers by Discos and their purchase cost is un-proportionally high and demands an explanation and transparency.

It is further learnt that the government has committed with the International Monetary Fund to ensure recovery of Rs 145 billion from consumers on account of GIDC during the outgoing fiscal year and wipe out power sector circular debt in three years through tariff adjustments. It is reported that the burden of circular debt repayment is also transferred to the consumers and is reflected in their bills as debt repayment.

The placement of the regulatory bodies like Nepra under the Ministry has comprised its independent status to balance the interest of the government and the citizens. Nepra, today manage, only and only, the interest of the government and concede off and on a bit on the direction of the government when driven by political considerations and not as a fair deal or respecting the rights of the consumer.

The government little realize that by passing on all its shortcomings by burdening the silent consumers with inflated and unreasonable billing, at the end of the day, it is hurting its own self at a much larger scale then the benefits drawn from this manipulation. Today, on account of exorbitant electricity costs, our production is non-competitive, locally and for exports. The Industries are closing down or moving to other competitive countries while exports have nosedived resulting in decline of local revenue and foreign exchange earnings. Whereas, the helpless consumers are often on streets protesting against inflated bills and no electricity. All of this will have its toll on the vote politics too.

The state managers need to work out and select between inflated electricity bills for smaller gains or higher revenues and foreign exchange earnings through affordable and competitive electricity billing to its consumers for much higher gains.

(The writer is former President Overseas Investors Chamber of Commerce and Industry)

Farhat Ali, "Inflated electricity bills," Business Recorder. 2017-08-26.
Keywords: Economics , Agricultural consumers , Fuel mix , Population , Electricity , Taxes , Nepra , CPPA , RLNG , PTV , Pakistan

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