Electricity prices: CPPA seeks higher fuel cost adjustment for Jan amid stubborn inflation

Electricity prices: CPPA seeks higher fuel cost adjustment for Jan amid stubborn inflation


The amount has been calculated at Rs7.13 per unit which translates into a net hike of Rs2.59

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ISLAMABAD (Dunya News/Web Desk) – Just days after the latest increase in fuel prices, people in Pakistan must brace for further hike in their electricity bills for the month of March, as the Central Power Purchasing Agency (CPPA) wants the fuel cost adjustment (FCA) hike.

The reason behind this request submitted to the National Electric Power Regulatory Authority (Nepra) is that use of expensive fuels for power generation after Pakistan failed to diversify its energy mix with cheaper alternative energy sources coupled with the rupee devaluation which makes the imported fuels more expensive.

Read more: Can Nepra refuse power tariff hikes? Will it protect consumers against govt inefficiency?

At the same, the county has been unable to secure new long-term liquefied natural gas (LNG) contracts from countries like Qatar despite the drop in prices, resulting in continued lower production by LNG-fired plants and the increase in the use of diesel and furnace oil.

The CPPA says the FCA for the month of January should be fixed at Rs7.13 per unit after the Nepra calculated the amount at Rs4.56 for December, translating into a net increase of Rs2.59.

People have experiencing a continuous increase in electricity prices due to the repeatedly hiked FCA in recent months thanks to the increase in the use of costly imported diesel and furnace oil.

In its latest calculation for January, the CPPA says 100 million units of electricity were produced by using diesel at a cost of Rs45.65. It was followed by a production cost of Rs35 per unit in the case of furnace oil, which had been used to generate 750 million units.

The purchasing power of people in Pakistan has stretched to an unbearable level as a stubborn inflation and stagnant wages are resulting in diminishing purchasing power.

It is a vicious circle as the reduced power consumption isn’t reflected in their monthly bills as they have to pay the rising capacity charges in the shape of quarterly tariff adjustment (QTA).

The capacity charges are the amount which the government has to pay to power producers even if the electricity they produce isn’t consumed.

Read more: Securing external financing to one of the most urgent issues for next Pakistan govt: Fitch

On the other hand, Fitch Ratings in its latest assessment has predicted even tougher IMF conditions for a future deal with the new elected government, which was described as a “key to the country’s credit profile”.

“We believe a government will assume office and engage with the IMF relatively quickly, but risks to political stability are likely to remain high. Public discontent could rise further if PTI remains sidelined – the election revealed continued strong public support for the party.”