CPPA Seeks Rs. 2.56 Per Unit September Fuel Cost Adjustment
Pakistan’s power consumers may face a proposed Rs. 2.56 per unit increase in their November bills after the Central Power Purchasing Agency, or CPPA, sought a monthly fuel cost adjustment for electricity consumed in September.
The proposed September fuel cost adjustment would allow power distribution companies to recover about Rs. 32.76 billion. CPPA said the actual fuel cost of electricity generation in September was Rs. 10.022 per unit, compared with a reference fuel cost of Rs. 7.46 per unit.
The National Electric Power Regulatory Authority, or Nepra, held a public hearing on the request. However, a hearing is not a final approval. Nepra must review the submitted data and issue its decision before any adjustment can be applied to eligible consumer bills.
The hearing also brought a wider concern into focus. Industrial representatives and power-sector officials said petroleum levies on furnace oil and high-speed diesel may be increasing the cost of electricity generation when cheaper fuels are unavailable.
What Is the September Fuel Cost Adjustment?
The September fuel cost adjustment is a proposed monthly change in electricity bills based on the difference between the fuel cost assumed in the reference tariff and the actual fuel cost of generation during September.
Fuel cost adjustment, often called FCA, is separate from the base electricity tariff. It changes from month to month because the fuel mix and fuel prices used for power generation can change.
For example, electricity generated from hydropower, nuclear plants and some domestic fuels can cost less than electricity produced using imported furnace oil or high-speed diesel. When the power system uses more expensive fuels than expected, the actual fuel cost rises.
CPPA said the actual September fuel cost was Rs. 10.022 per unit. The reference rate was Rs. 7.46 per unit. This created a difference of Rs. 2.56 per unit, which CPPA asked Nepra to pass on through November bills.
The final amount, eligible consumer categories and implementation details will depend on Nepra’s determination and any subsequent notification.
Why Is CPPA Seeking an Additional Charge?
According to CPPA, the proposed adjustment reflects changes in the generation fuel mix and the higher cost of alternative fuels used during September.
Power-sector entities told the hearing that furnace oil- and diesel-based generation made up 3.6% of total electricity generation in September. This occurred because liquefied natural gas, or LNG, and other lower-cost sources were not available in sufficient quantities.
At first glance, 3.6% may look like a small share. Yet diesel and furnace oil are expensive fuels for power generation. Even limited use can raise the average fuel cost if the difference between those sources and cheaper generation is large.
CPPA data presented at the hearing showed that high-speed diesel generated 213 gigawatt-hours, or GWh, of electricity in September. This was about 1.6% of total grid supply.
The generation cost for high-speed diesel was reported at Rs. 62.14 per unit. In August, 80GWh was generated from the same fuel at a reported cost of Rs. 54 per unit.
Furnace oil-based generation stood at 263GWh in September, compared with 321GWh in August. Its reported generation cost fell to Rs. 44.86 per unit from around Rs. 46 per unit in August. However, it remained an expensive option compared with several other generation sources.
Petroleum Levy and Electricity Costs
Industrial representatives used the hearing to call for the removal or reduction of petroleum levy on furnace oil and diesel used for power generation.
They said furnace oil was carrying a petroleum levy of about Rs. 76,000 per tonne, while diesel was carrying a levy of about Rs. 80 per litre. The industry representatives argued that these charges substantially increase the cost of power generated from those fuels.
They estimated that removing the levies could reduce generation costs from around Rs. 62 per unit to a range of Rs. 44 to Rs. 50 per unit. This is an industry position raised during the hearing, not a tariff decision by Nepra.
Power Planning and Monitoring Company chief financial officer Naveed Qaiser agreed that petroleum levies on diesel and furnace oil had a substantial effect on generation costs. He said the power division had raised the matter at relevant forums.
The debate involves a policy trade-off. Petroleum levies contribute to government revenue. Reducing them could lower the cost of expensive fuel-based electricity generation. However, it could also reduce government receipts unless the fiscal impact is addressed elsewhere.
Why the Fuel Mix Matters
Pakistan’s electricity cost is not determined by a single fuel price. It is shaped by the combination of generation sources used in a given month.
The mix can include hydropower, nuclear energy, local and imported coal, natural gas, LNG, renewable sources, furnace oil and diesel. Each source has a different cost structure.
When lower-cost sources are available and dispatched, the average fuel cost can remain relatively contained. When those sources become constrained, the system may need to use more costly alternatives.
The September fuel cost adjustment illustrates how that shift affects monthly bills. CPPA said average fuel cost rose by almost 37.5% year-on-year in September. The agency linked the increase to more costly and heavily taxed fuels being used to compensate for reduced LNG supplies and greater reliance on imported coal.
This does not mean every consumer will pay the same adjustment. FCA applicability can vary by consumer category and tariff rules. Consumers should rely on the final Nepra decision and their bill details instead of assumptions based on the proposed figure.
CPPA Says Net November Impact May Be Lower
Although CPPA requested an additional Rs. 2.56 per unit FCA, it said the net increase in November bills would not exceed Rs. 1.45 per unit.
According to CPPA, an existing positive adjustment in October would expire and be replaced by the proposed adjustment in November. Therefore, consumers would see the difference between the outgoing and incoming charges rather than the full Rs. 2.56 per unit as a new net increase.
This is an important distinction. The Rs. 2.56 per unit figure is the proposed September fuel cost adjustment. The amount that consumers may experience as an increase compared with the preceding bill can be different.
Still, the final consumer impact will depend on Nepra’s decision, the exact billing period and the tariff category. The regulator’s written determination will be the authoritative source.
Industry Questions Data and Coal Costs
The public hearing also included concerns about the reliability and timing of data submitted by government entities.
Industrial representatives and Nepra participants raised questions over discrepancies in generation data presented by CPPA. They also questioned an earlier adjustment linked to LNG prices, arguing that timely reporting could have reduced part of the proposed additional FCA.
Officials from Nepra’s Monitoring and Enforcement Division questioned the consistency of information supplied by government entities. Nepra member Amina Ahmed acknowledged the concerns and said the regulator was aware of the discrepancies.
The issue matters because FCAs are based on actual data. If generation, fuel-price or dispatch information is late or inconsistent, it becomes harder for consumers and stakeholders to understand how an adjustment has been calculated.
Industry representatives also raised concerns about coal procurement at the Port Qasim power plant. They alleged that coal was being purchased through affiliated entities at higher prices than those paid by other power plants.
Nepra assured participants that only prudent coal costs would be allowed. Any cost found to be imprudent should not be passed on to consumers, according to the regulator’s position at the hearing.
Industrial Demand Rose in September
Government entities reported that overall electricity demand increased by 6.5% in September. Industrial consumption rose by 6.7%.
Industry representatives disputed the interpretation of this increase. They said higher industrial demand reflected a shift from captive power generation to the national grid, rather than the effect of the surplus incremental package.
Captive power refers to electricity produced by industrial facilities for their own use. When factories move from captive generation to grid electricity, recorded demand on the national system can rise even if underlying industrial output does not increase by the same amount.
This distinction is important for policymakers. Higher grid consumption can affect demand forecasts, system planning and the generation mix needed to meet demand.
What Consumers Should Watch Next
The most important next step is Nepra’s decision on the September fuel cost adjustment.
Consumers should look for the regulator’s written determination, which should clarify the approved per-unit change, its application period and any consumer categories that are exempt or treated differently.
They should also distinguish the FCA from other items on an electricity bill. A monthly FCA is designed to reflect fuel-cost variations. It is not the same as the base tariff, taxes, surcharges, quarterly adjustments or fixed charges.
Businesses, especially energy-intensive manufacturers, will also be watching whether the government considers changes to petroleum levies on furnace oil and diesel used in power generation.
Any such change could affect electricity costs during periods when the system relies more heavily on expensive liquid fuels. However, no reduction was announced during the hearing.
The Bottom Line
CPPA has requested a Rs. 2.56 per unit September fuel cost adjustment to recover about Rs. 32.76 billion through eligible November electricity bills.
The proposed increase is linked to a costlier generation mix, including the use of furnace oil and high-speed diesel when LNG and other cheaper sources were constrained.
Industrial representatives and power-sector officials say petroleum levies on these fuels add significantly to generation costs. However, Nepra has not yet issued its final decision, and the actual impact on bills may differ from CPPA’s request.
For now, the Rs. 2.56 figure remains a proposal under regulatory review. Consumers should wait for Nepra’s final determination before treating it as a confirmed charge.