Fixed power charge to be levied per kW, not per connection

ISLAMABAD: The government on Tuesday reluctantly admitted that the industrial sector had, for the first time, been fully relieved of the cross-subsidy burden to compete globally when the finance ministry revealed that the financial impact of the fixed charges introduced for residential electricity consumers had been greater than previously believed.

At an almost one-way public hearing presided by PTD General Manager Shaukat Ali on Rs 4.04 per unit average cut in power rates for industrial consumers and imposition of fixed charges on residential consumers, industrial consumers, power division, and Nepra were all praising each other for a long-overdue “great move” and “first step in the right direction”.

None appeared on behalf of more than 28.5 million domestic consumers who will be affected by the charges.

The Power Division team, headed by Additional Secretary Mehfooz Bhatti, along with the chief financial officer of Power Planning and Manage­ment Com­pany (PPMC), Naveed Qaiser, presented that fixed charges would be recovered from residential customers in the amount of Rs200-675 per kilowatt a month instead of Rs200-675 per connection per month.

This means that the charge would be fixed to the sanctioned load, irrespective of the actual consumption. For example, a consumer with a 2kW sanctioned load would incur a monthly bill of Rs400 for a fixed price of Rs200/kW, while another consumer would pay Rs2,500 for a fixed price of Rs500/kW. A 6kW sanctioned load would incur a bill of Rs4,050 for a fixed price of Rs675/Kw.

Mr Qaiser also added that the move would be for the first time when a two-part tariff would be levied on the consumers to meet the Rs2.56 trillion annual fixed cost of capacity. At the same time, though the amount of Rs101bn would be saved for the consumers from the general cross-subsidy provided to the industrial consumers, the recovery of the fixed charge will increase by Rs132bn, from Rs223bn (7pc) to Rs355bn (10pc), excluding 18pc GST and other surcharges and duties.

He said that about Rs31bn to be collected through fixed charges would be used to reduce the variable tariff of consumers using more than 300 units per month to minimise their incentive to move away from the national grid, while the remaining Rs101bn would be used to ease the industrial burden.

Mr. Bhatti further stated that the industrial tariff would now come down to around 11.50 cents per unit from around 13, though it still exceeded the regional competitors, but the issue of cross-subsidy was absent.

Moreover, calculations by the financial advisory firm Optimus Capital Management revealed what the average power tariff for protected consumers would be in relation to units 1 to 100, which would rise by 76pc or Rs8/unit due to the fixed charge. The average cost for units 101 to 200 in the protected category would rise by Rs4/unit (or 31pc).

For the non-protected category, Optimus estimated a 74pc increase, or Rs16.50 per unit, up to 100 units, followed by a 21pc increase, or Rs6 per unit, in the 101 to 200 units band.