To support loss-making power distribution companies (Discos), the national power regulator has raised the national average tariff by about Rs5 per unit. The increase, effective from July 1, will provide an additional Rs477bn in revenue for Discos during the current fiscal year. The new national average tariff has been set at Rs29.78 per unit, Rs4.96 higher than the previous rate. Factors prompting this increase include the rupee’s devaluation, high inflation and interest rates, new capacities, and low sales growth.
Impact on Consumers and Power Sector Financials
After incorporating surcharges, taxes, duties, levies, and monthly and quarterly adjustments, the average national tariff would now be between Rs50 and 56 per unit. Notably, a major increase was observed in capacity charges, which rose to Rs17 per unit from Rs11, impacting the financials by Rs623bn or Rs5.94 per unit. A Rs2.6 per unit reduction in energy charge was implemented to balance this. The distribution margin for Discos also saw a rise of 94 paise per unit to Rs3.1, equating to Rs341bn, alongside various prior-year adjustments.
Regulator Projections and Utility Company Reactions
The regulator anticipates a decrease in Discos’ electricity sales from 113,002 GWh in the 2022-23 fiscal year to 110,165 GWh in 2023-24. Thus, the projected sales revenue for all Discos in the next fiscal year is Rs3.281tr compared to Rs2.8tr last year. These tariff increases were a significant requirement of the $3bn standby arrangement (SBA) signed with the IMF to promote structural reforms, particularly in the energy sector’s viability and State-Owned Enterprise (SOE) governance.
The new tariffs, determined based on petitions filed by Discos, will be charged to consumers post-government notification. They include the uniform base rate applicable across the country, which will also impact consumers of Karachi’s power utility, K-Electric.
