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Electricity rates set to increase by up to 95 paisa from Feb 1 - Inside Financial Markets

Electricity rates set to increase by up to 95 paisa from Feb 1

– Dawn News

ISLAMABAD: The government has decided to increase base electricity rates by up to 95 paisa per unit and one-slab benefit to ‘unprotected consumers’ with effect from February 1 to meet commitments made with the international lending agencies.

The decision would reduce power sector subsidy by Rs20 billion and envisages increasing average base tariff to Rs18.75 per unit for all distribution companies including K-Electric, showing an average increase of about 53 paisa per unit.

To formally implement the decision, the National Electric Power Regulatory Authority (Nepra) fixed a request for tariff increase of the Power Division duly approved by the Economic Coordination Committee (ECC) of the Cabinet for public hearing on January 24.

This is second phase of the government’s three-phased “Retargeting of Power Sector Subsidies” committed to with the World Bank and the Inter­national Monetary Fund. The ECC had on December 17 approved the second phase of the subsidy reduction.

In its petition, the Power Division has conveyed to the regulator the policy guidelines for re-targeting the power sector subsidies phase-II. It also asked the regulator for “removal of one slab benefit (Incremental Block Tariff) and incorporation of revised subsidy and inter-distribution companies’ tariff rationalisation/cross subsidies through modification and adjustments in the schedule of tariff”.

Phase-I came into force on Oct 1, 2021 and provided expanded definition of lifeline consumers, creation of new categories of consumers (protected and unprotected) and restructuring of 301-700 units slab without changing effective tariff.

As per the petition for phase-II, there would be no change in tariff for the “protected residential consumers” commonly known as life line consumers using up to 200 units per month.

For unprotected consumers using 1 to 700 units per month, the tariff will go up by eight paisa to 95 paisa per unit for various categories. This will be on top of the removal of one-slab benefit of cheaper rate. Further add-on would be on all categories in the shape of sales tax, fuel price adjustments, quarterly adjustments, financing cost surcharge and so on.

For these unprotected consumers using 1-100 units, the base tariff will increase by eight paisa per unit to Rs9.50, followed by 18 paisa per unit for 101-200 to Rs10.36 and 48 paisa per unit increase to Rs12.62 for 201-300 units per month.

The tariff for all higher categories would go up by 95 paisa per unit. As such, those consuming 301 to 400 units per month would now be charged at Rs15.75 per unit instead of Rs14.78 at present.

Syed Zaki Hussain

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Inside Financial Markets was a joint publication of Pakistan Stock Exchange (PSX)and Society of Technical Analysts Pakistan (STAP)