ISLAMABAD (News Desk) – Electricity consumers are likely to pay of Rs3.55 per unit as Fuel Cost Adjustment (FCA) after the Central Power Purchasing Agency (CPPA) requested the National Electric Power Regulatory Authority (Nepra) for adjust the amount in their monthly bills of December.
People regularly hear about the FCA, but there is a lack of awareness about the term. So what is it? The FCA is imposed to adjust monthly electricity tariffs based on fluctuations in the prices for crude oil, liquefied natural gas (LNG) and coal in the international market – the fuels used for power generation in Pakistan.
THE MYSTERY
Unfortunately, many, if not an overwhelming majority or all, think that the FCA always results in inflating your electricity bills. But isn’t the case. Sometimes it does, but isn’t the case otherwise.
For example, the FCA – after net positive or negative adjustment [to be explained later in this report] – for the month of January was Rs2 and you paid it through your bill for the month of March. Now if the FCA for February was fixed at Rs2.20 then you are paying an additional amount of just 20 paisa in April.
On the other hand, it is also possible that the February FCA is Rs1.80. In that case, your per unit electrcity price in April would be 20 paisa less than the previous month.
THE FORMULA
To begin with, basket fuel cost is calculated by evaluating the total cost of different sources of fuel like coal, LNG and furnace oil used for generating electricity during the given month.
At the end of each month, the basket fuel cost is compared with the NEPRA’s reference fuel cost and then the adjustment is added to the consumers’ electricity bills after two months.
If the total fuel cost in a certain month is more than the reference cost, then the additional amount will be added to the consumers’ bill and in case the fuel cost is less than the reference cost, the amount be subtracted from the bill.
WHAT WAS THE FCA FOR SEPTEMBER AND AUGUST?
The most important thing to remember that it is the demand made by CPPA. Obviously, there would some FCA but it doesn’t mean that the Nepra is going to totally agree with the CPPA as it can even reject or reduce the amount after hearing the plea.
But given the situation Pakistan is facing, the option of rejection is not likely to materialise.
Earlier this month, the Nepra had approved a net positive adjustment of 40 paisa for September after the CPPA had sought an adjusted amount of 55 paisa.
Meanwhile, the FCA approved for August was Rs1.71.