Electricity Tariff Set to Surge by Up to Rs. 5 per Unit in FY 2024-25

Staff Report

The base electricity tariff could rise by up to Rs. 5 per unit for FY 2024-25 as the CPPA submitted projected power purchases.

The total purchase cost is estimated at Rs. 3.58 trillion, up Rs. 310 billion from the current cost.

CPPA-G presented seven scenarios to NEPRA, considering demand growth (3% to 5%), exchange rates (Rupee at 275 and 300), and hydrology variations.

The projection includes consumer burdens: 2.40% of US inflation, 12.20% domestic inflation, interest charges (21.37%), electricity purchase fees (5.31%), and a market operator fee of Rs. 3.48 per unit.

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In the ongoing fiscal year, capacity payments constituted 71% of the PPP, with energy costs at 29%. Capacity charges were Rs. 16.22 per unit, and energy charges Rs. 6.73 per unit.

Total power purchase prices for FY 2024-25 are projected from Rs. 337 billion to Rs. 358 billion under different scenarios, with PPP ranging from Rs. 25.03 to Rs. 27.11 per unit. The current PPP is Rs. 22.95 per unit.

Capacity charges constitute approximately 64% of the total projected PPP, with energy costs at around 34%. Variable O&M costs are projected at Rs. 0.48 to Rs. 0.50 per unit under various scenarios.

The increase in PPP varies from Rs. 2.07 to Rs. 4.16 per unit under different scenarios.

The base tariff also includes distribution margins for XWDiscos, transmission, and distribution losses.

XWDiscos’ distribution margin for the current fiscal year is Rs. 3.10 per unit, likely increasing by 15% to 20%.

NEPRA scheduled a hearing for May 23, 2024. If approved, DISCOs consumers could face an additional financial burden of Rs. 3.37 trillion to Rs. 3.58 trillion in FY 2024-25.

This increase would raise the current average end-consumer price from Rs. 29.78 per unit to approximately Rs. 35 per unit.