The National Electric Power Regulatory Authority (NEPRA) has approved an increase in electricity rates by up to Rs. 2.56 per unit under the fuel charges adjustment (FCA) mechanism, to be reflected in August bills.

This hike will impose an additional financial burden of Rs. 33.45 billion on power consumers, potentially rising to Rs. 39 billion when accounting for the 18 percent general sales tax (GST).

The adjustment addresses the gap between the actual cost of power generation and the previously charged rates. The rise in generation costs was primarily driven by higher prices for liquefied natural gas (LNG) and oil, coupled with a decrease in electricity demand.

The increase will affect all consumer categories except electric vehicle charging stations and lifeline consumers. Initially, state-run power distribution companies (DISCOs) sought permission to charge an additional Rs. 2.63 per unit, citing a higher-than-expected fuel cost of Rs. 9.77 per unit compared to the reference cost of Rs. 7.14 per unit.

During a public hearing on July 31, the Central Power Purchasing Agency (CPPA) highlighted several factors contributing to the increased costs. These included lower-than-expected generation from hydro and local coal sources, the outage of the Neelum-Jhelum Hydropower Project, and the necessity to utilize fuels like RLNG, which were not a significant part of the reference mix, due to system requirements. This led to a 10 percent shortfall in actual generation.

In June, the country generated 13,459 gigawatt-hours (GWh) of electricity at a fuel cost of Rs. 119.7 billion, translating to Rs. 8.89 per unit. Of this, 13,071 GWh were delivered to DISCOs for Rs. 127.7 billion (Rs. 9.77 per unit). The fuel cost adjustment for June 2024, at Rs. 2.63 per unit, marks a 40 percent increase compared to last year’s Rs. 1.88 per unit.