137 percent rise in hydel-based power tariff on the cards

Posted on June 14, 2011. Filed under: Hydal |

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A total of 137 percent raise in hydel-based power tariff is on the cards, as WAPDA in a very surprising and unexpected move, has filed a petition to NEPRA for determination of hydel-based generation tariff for Fiscal Year 2011-12.

Experts from the power sector are of the view that WAPDA, in other words, has pushed NEPRA to raise consumer-end tariff by another 8 percent in one go in a situation when the government is looking for ways and means to mitigate any further increase in consumer-end tariff.

It may be noted that in the last month 2 percent increase in tariff had resulted into massive agitation across the country. These circles have further feared an increase in circular debt with WAPDA’s present petition to NEPRA.

Interestingly, most of the prayer/petition to NEPRA is based on indefensible grounds with a single point agenda of squeezing the hapless consumers further in the days to come.

The proposed tariff in the WAPDA petition is based on projected net electrical output of 30,783 GWh (or 30,786 billion units) against an estimated total revenue requirement of Rs80, 890 million, which takes the per unit cost from existing level of Rs1.05 (as propagated by WAPDA instead of the actual Rs1.18) to Rs2.69, or 137 percent increase in one go.

Based on the earlier actual tariff of Rs1.18/ unit, it is seen that the power customers would be further burdened by a hefty Rs45-50 billion, which in turn translates into the requirement to enhance PEPCO’s existing consumer end tariff by another 8 percent. If we add the requirement as informed by the Ministry of Finance then the consumers may be burdened by a total of 24% in FY 2011-12.

Further, the sources mentioned that the per unit cost of hydel generation could remain Rs2.69 only when ideal situation prevails and it is likely to shoot up to Rs5 per unit in case of poor hydrology (due to drought or such other conditions) for the same quantity of generation.

It may be noted that WAPDA owns and operates 13 hydel power stations, having installed capacity of 6,444MW. However, on commissioning of Khan Khwar Power Station (72MW) in December 2010, the installed capacity has been increased to 6,516MW.

The tariff petition of WAPDA Hydroelectric has been prepared in view of its Audited Financial Statements for FY 2009-10 and projected change in revenue requirements for FY 2011-12.

The power sector sources are of the view that the tariff petition is based on very poor grounds, carrying no substance if an independent analysis is made.

These circles have mentioned that WAPDA tariff petition has pointed out that the Regulatory Assets Base (RAB) has increased to Rs213, 593 million from Rs143, 054 million due to more capital investment in the ongoing projects.

According to these circles, shifting of the cost of ongoing projects towards the consumers in the shape of tariff is not understandable. Especially, when these ongoing projects are delayed due to late decision making of WAPDA, they added. According to these sources all projects of WAPDA are delayed.

They said the hydel projects like Khan Khwar, Alai Khwar and Duber Khwar were due to be completed by 2006, but delayed till date. Only Khan Khwar has been completed in December 2010, which can be dubbed as nothing but poor performance. Similarly, Neelum-Jhelum and Mangla Raising projects are also delayed by a period of three to four years.

The power sector circles agree that earthquake of 2005 had impacted the completion of some of these projects, but still a delay of four years in some projects is unacceptable. The irony is that the WAPDA has decided to shift the cost towards the consumer by filing a petition before NEPRA, they added.

Similarly, the tariff petition has suggested that the Operation & Maintenance (O&M) cost has increased to Rs10, 629 million from Rs4, 114 million due to revision in Pay & Allowances as well as increased maintenance cost. According to the sources, the O&M cost is calculated on the basis of Wholesale Price Index and this indexation never crosses to 15 percent maximum in a year. In WAPDA’s case, it can increase to 30 percent for two years, but an increase of 150 percent, as suggested by the O&M cost in the petition, is not easy to digest. They said it suggests that WAPDA was simply trying to generate funds by increasing the price of hydel units.

The power sector circles has raised eyebrows over WAPDA’s claim in the tariff petition that the other income of hydel activities has decreased to Rs825 million from Rs2, 708 million. They said the other income comes through sale of fish and logs and it should have been increased in any case, but the WAPDA petition suggests that it has come down tremendously. However, a few other circles have pointed out that decrease in other income could be due to wastage of fish and logs in last year floods.

Copyright Business Recorder, 2011

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