Nepra has lowered the power tariff for industrial and agricultural consumers from 48 paisa to 90 paisa/kWh for Hyderabad Electric Supply Company (Hesco), Peshawar Electric Supply Company (Pesco) and Quetta Electric Supply Company (Qesco).
This major step completes the requirement for the transformation of Wapda to independent generation, transmission and distribution companies, and Wapda's involvement in the power sector of Pakistan is expected to be restricted to management, operation and expansion of public sector hydro electricity generation only.
The decision of rates reduction for industrial and agriculture consumers for the three discos aims at bringing them at par with the recently announced lower rates allowed to the five distribution companies in the Punjab province.
However, Nepra has maintained the rates of residential consumers consuming up to 300 units and commercial consumers consuming 100 units per month at their existing level.
The three discos' reduction for different categories of industrial consumers are industrial B 1, 89 paisa, B 2, 70 paisa, B 3, 80 paisa, B 4 90 paisa and agriculture private 48 paisa.
The reduction in industrial and agriculture rates has been allowed to avoid any adverse economic and social welfare impact due to disparity in the rates of industrial and agriculture consumers between the areas served by the eight ex-Wapda distribution companies covering all the four provinces of Pakistan except Karachi which is served by KESC.
With the determination of new rates, the three companies (Hesco, Pesco and Qesco) will not be able to generate adequate revenues to cover their costs for operation and service expansion.
The reasons enlisted by Nepra for the inadequacy of revenues are: high percentage of consumption in the lower rate (cross subsidised) such as residential consumers consuming less than 300 units a month and agriculture consumers, low load density requiring extensive distribution system such as rural areas of Balochistan and Sindh.
Consequently, there are higher level of losses as compared to other discos where consumers are generally law abiding such as Iesco and Lesco.
The Authority said that the causes leading to financial adequacy cannot be eliminated in a short time and the rates cannot be exorbitantly and abruptly raised to compensate for the inadequacy.
Therefore, national regulatory body has suggested to the Federal Government to cover the revenue gap through provision of subsidy, as total annual subsidy required to be provided by the Federal Government is Rs 14.1 billion to the discos.
According to Nepra estimates, annual cost/revenue requirement of the Hesco is Rs 21.921 million, Pesco, Rs 26.246 million and Qesco, Rs 12.625 million while annual revenue expected from Hesco is Rs 16.213 million, Pesco, Rs 21.256 and Qesco, Rs 10.132 million respectively.
After evaluating the figures, Hesco has to face the revenue deficit to the tune of Rs 5.704 million, Pesco, Rs 4.890 million and Qesco, Rs 3.494 million, which would be met out with subsidy provided by the Federal Government.
The three discos are required monthly subsidy, ranging between Rs 291 and 65 million.
The new rates will be effective from the date of notification by the Federal Government in the official gazette.
Nepra has already reduced the tariff for Faisalabad Electric Supply Company (Fesco), Islamabad Electric Supply Company (Iesco), Gujranwala Electric Power Company (Gepco), Lahore Electric Supply Company (Lesco) and Multan Electric Power Company (Mepco).