The National Electric Power Regulatory Authority (Nepra) has allowed Lahore Electric Supply Company (Lesco) and Quetta Electric Supply Company (Qesco) to increase tariffs by up to Rs 3.01/unit for the current financial year across the board.

According to the tariff determinations, tariff for lifeline consumers has been raised by Re 1 per unit whereas other categories of domestic consumers will have to face additional burden ranging from 50 paisa to Rs 3.01 per unit.

Nepra has also recommended an increase of Rs 2 per unit for commercial consumers followed by a raise of Rs 2.60 per unit for industrial consumers and by Rs 1.50 per unit for agricultural consumers.

Lesco in its tariff petition has forecast that 36 percent of total generation is expected on residual fuel oil (RFO) but its share in overall energy cost is to be 77 percent, which means that variation in generation mix and oil prices will have great impact on the cost of generation and will ultimately affect the consumer-end tariff.The RFO prices over the last year have shown an increasing trend. During 2010-11, the average RFO price was projected as Rs 47,000, excluding sales tax, per ton, whereby the average RFO prices from July 2011 to December 2011 were around Rs 66,000, excluding sales tax, per ton.

The RFO prices in Pakistan are not only affected by the international market but also by the rupee devaluation.

Unlike 2010-11 during 2011-12, approximately 2 percent generation is expected to be generated on high speed diesel (HSD) due to ongoing shortage of gas supply.

The Ministry of Water and Power, in its letter of August 4, 2011 had proposed to the Authority to revert to previous system of all slab benefit for the domestic consumers for the tariff determinations of the financial year 2010-11. Lesco is expected to earn Rs 130 billion revenue from this raise in consumer-end tariff.

According to the determination, the Authority considered the communication from Ministry of Water and Power and argued that the Authority while assessing the tariff petitions pertaining to the first quarter of the financial year 2010-11 decided that the residential consumers will be given the benefit of only one previous slab. The decision was based on the rationale that the residential consumers with consumption of more than 300 units come mostly from affording class.

Nepra also said that if these consumers were also given the benefit of subsidised slabs, meant for low income group, the tariff of lower slabs will have to be increased further.

Nepra further stated that the Authority was still of the view that the benefit of subsidised residential rates should be restricted to low income groups only. In view thereof, the Authority said it was constrained not to accept the proposal of Ministry of Water and Power and decided to maintain its previous decision, allowing only one slab benefit which is incorporated in the assumed consumption of residential consumers.

Regarding Qesco, the Nepra said that the former had estimated the purchase of 5,208 GWhs in 2011-12 based on actual purchase of 5,086 GWHs in 2010-11 showing an increase of 2.4 percent for additional generation capacity.

The projected purchases for 2010-11 as per the Authority's determination were 5.456 GWhs. On the bases of estimated losses of 21.6 percent, the petitioner's estimation for the units to be sold during 2011-12 is 4,089 GWhs.

The Authority observed that in view of the additional generation capacity of 1359 MW already added to the system, the petitioner's sales estimation appeared to be on the lower side.

The petitioner had estimated its T&D losses to remain at 21.5 percent despite the investment plan of Rs 5,194 million projected for 2011-12 and no improvement had been proposed in the losses. The losses' targets for 2010-11 as per the Authority's determination were 18 percent. Qesco is expected to generate additional revenue of Rs 52 billion from this raise in tariff.