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Nepra reduces Wapda hydropower tariff by 27.5% - Inside Financial Markets

Nepra reduces Wapda hydropower tariff by 27.5%

– Dawn News

The National Electric Power Regulatory Authority (Nepra) on Monday determined about 27.5 per cent reduction in average bulk hydroelectric tariff of the Water and Power Development Authority (Wapda) to ensure its revenue stream at Rs124 billion for fiscal year 2020-21.

The bulk hydropower tariff at which Wapda sells its power generation from all hydropower stations to the Central Power Purchasing Agency has been determined at Rs4.11 per unit for FY2020-21 against Rs5.67 fixed in FY2017-18.

The determination will not have a direct impact on consumer-end tariff because it will form part of the larger basket of all fuels. Hydropower contribution normally varies between 9pc and 40pc of the total power supply depending on water availability. The government has already given the international lenders an undertaking to increase power tariff by about 35pc by June 2022.

Regulator’s determination will not have a direct impact on consumer-end tariff

Nepra in its determination said the previous average bulk tariff for Wapda approved in FY2018 stood at Rs5.67 per kWh, including Rs3.55 per kWh net hydel profit (NHP) or hydel levies, which had now been determined at Rs4.11 per unit (down by Rs1.56) for FY2021 that also included 96 paisa per kWh NHP or hydel levies.

In its tariff petition, Wapda had originally demanded Rs7.32 per unit but then reduced it to Rs6.20 against the previously approved rate of Rs5.67. While the regulator increased the base tariff for Wapda power stations by Rs1.03 per unit, up by about 49pc, the major reductions were achieved through legal lacunae pertaining to NHP and hydel levies.

As per the decision, base tariff for Wapda plants has been increased from Rs2.12 per unit to Rs3.15, an increase of Rs 1.03. However, hydel profit and levies have been reduced from Rs3.55 to 96 paisa per unit. There were certain outstanding issues on account of NHP which have now been addressed and, therefore, net hydel profit has gone down.

In overall terms, Wapda had sought approval of Rs187bn revenue requirement for FY2020-21 which the regulator reduced to Rs124bn. Nepra also worked out a revenue gap of Rs9bn against Wapda’s Rs53bn claims.

The regulator said it had previously allowed indexation at 5pc at the rate on Rs1.10 per kWh which increased the rate of NHP to Rs1.155 per kWh. It said the Council of Common Interests had in December 2016 also allowed payment of NHP to the government of Punjab at Rs1.10 per unit, on the analogy of the government of Khyber Pakhtunkhwa, for hydropower plants in Punjab for FY 2016-17. The same rate indexed at 5pc was made applicable to Punjab-based Wapda plant from the same year in Wapda tariff.

Wapda thus indexed the NHP rate of 5pc to Rs1.2128 per kWh for FY2021 for KP which had higher claim of Rs1.4 per unit on the basis of previous adjustments as well. However, Nepra concluded that indexation prior to 2016 could not be allowed.

Nepra also rejected Wapda’s request for enhancing AJK water utilisation charges from 15 paisa per unit to Rs1.155 on account of similar treatment to Azad Kashmir as was being given to Punjab and KP under an ECC decision and an understanding reached with the AJK government. Nepra disallowed the change, saying the 2003 Mangla Raising Agreement was yet to be amended and, therefore, in the absence of revision in the base agreement, revision in the rate from current 15 paisa per unit was not legally justified.

Syed Zaki Hussain

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