Electricity price: What is fuel price adjustment Charges and how is it increasing your electricity bill?
Looking at amount written under FPA i.e. Electric Fuel Price Adjustment.
What is a fuel price adjustment Charges ?
fuel price adjustment : When we asked Tahir Abbas Head of Research at Arif Habib Limited about this he gave a detailed answer about which is summarized below.
To understand the fuel price adjustment it is important to understand the actual fuel cost cost of fuel in a month & reference fuel cost.
At the beginning of every financial year National Electric Power Regulatory Authority NEPRA issues a reference fuel cost. That is a reference against which to compare total cost of fuel each month.
Total cost of fuel used in the production of electricity in a month basket fuel cost is calculated based on the cost of fuel such as coal LNG furnace oil used in different sources of energy in country. goes
Fuel price adjustment: Exemption for 1 crore 71 lakh consumers, but who will pay this money?
Electricity bill of my house has-been increasing for several months. A person can bear it for half a month but this increase is happening continuously. The increase in bill for August is very high which is now out of my financial tolerance.
Ramzan Baloch a resident of Le Market area of Karachi told the British News about the increase in his electricity bill in month of August that in month of May his electricity bill was around 5,500 & in June it went up to 7,800. in the month of July it became eight thousand & in the month of August it became twelve & a half thousand.
Ramzan says that there is no AC in his house and the electricity consumption is very low, but the electricity bill in the month of August has left him worried.
Bashir Ahmed a resident of Capital Islamabad also complained about increase in his electricity bill & said that his bill has increased a lot.
Bashir Ahmed is a government employee who lives in a government flat. According to him despite using very little electricity his electricity bill has reached 10,000.
Imran who lives in Karachi also complained about the increase in his electricity bill. He said that electricity bill of 30000 to 32000 rupees to a user of 600 units is absolute cruelty and injustice.
Not only these three consumers are worried about the additional electricity bills in August but people are protesting because of the high electricity bills in whole country.
Looking at this situation PM Shahbaz Sharif announced on Tuesday evening that 1 crore 71 lakh out of 3 crore electricity consumers in the country will not have to pay fuel adjustment charges on their electricity bills.
In Doha the capital of Qatar Prime Minister said that apart from these consumers remaining 13 million consumers are also being considered for relief.
He said that out of the remaining 1 crore 30 lakh consumers most of them are high status people but they are also being reviewed with regard to this fuel adjustment charge.
Domestic consumers are the largest consumers of electricity in Pakistan & according to government data their number is around 50%.
Commercial users account for 7% percent and industrial users account for 25 percent. Apart from this agricultural consumers account for nine percent & other sectors consume eight percent of electricity.
Shahbaz Sharif said that this decision to give relief to 1 crore 71 lakh consumers has-been made after consultation with his allied parties in the government coalition but with this announcement question started circulating that how the government should give this discount. & where will the money for this relief come from?
Trying to understand why electricity bills had increased so much before finding outb?
The increase in these electricity bills in month of August was attributed to the fuel price adjustment.
It may be noted that power sector regulator Nepra had allowed fuel adjustment of Rs 11.37 per unit to K Electric and Rs 9.89 per unit to other power distribution companies of Pakistan which were allowed to be received in mounth of August.
Syed Akhtar Ali a former member of the Planning Commission of Pakistan Energy told the British news that it was a fact that the fuel cost had gone up a lot.
According to him coal which was 100 dollars per ton in May June last year has reached 300 dollars in these months this year and similarly RLNG which was 7-8$ dollars per mmbtu in middle of last year. It went up to $40 in middle of this year.
How will the fuel adjustment surcharge waiver be financed?
Energy expert Samiullah Tariq says that the government can waive fuel adjustment in consumer bills but the power companies will receive it & the only way for this is for the government to subsidize the companies.
He said It seems that the government will give targeted subsidy which includes consumers who use less units of electricity who are domestic consumers & also those who use less electricity.
He said If we look at the data of electricity consumption in month of July¹⁴ billion units of electricity were used in the entire country apart from K-Electric. If Karachi is included this number will go higher.
"If only 14 billion units are taken and fully subsidized then total amount in terms of fuel adjustment at rate of nine & ten rupees in a month becomes 130 to 140 billion & the government cannot give so much subsidy because 1 is that the government does not have enough financial resources other is that the IMF will not allow it from where we have to get the next tranche of the loan.
According to Samiullah Tariq only government can tell the details of the waiver of fuel adjustment surcharge but it seems that this fuel adjustment will either be adjusted in pieces in next months or else the government will give targeted subsidy for which Shahid said. Talked to the IMF.
The former finance minister of Pakistan Mr Dr. Hafeez Pasha also says the same thing that electricity generating companies will have to give money in the form of fuel adjustment because if it is not given the revolving debt of the sector will increase on which IM F objects.
According to him this can be a targeted subsidy in which the government pays for the domestic consumers who consume two to 3 hundred units of electricity but to make it possible government will-have to collect additional taxes.
When Prime Minister Mian Shehaz Sharif waived the fuel adjustment in August bills of 1 crore 71 lakh consumers when contacted Mr Bilal Azhar Kayani Prime Minister Coordinator for Energy said that the details were given by the Energy Minister. Will give in the press conference.
He told the British news in a written message in response to waiving the fuel adjustment surcharge by giving a subsidy that recovery of fuel adjustment surcharge has-been delayed until electricity rates come down.
Thus at the end of each month total fuel cost of that month is compared with reference fuel cost & accordingly this adjustment is added to electricity bills after 2 months.
If the total fuel cost in that month is more than the reference cost then amount of FPA will increase in your bill while if the total fuel cost of that month is less than reference cost then the amount of FPA will decrease. This is called fuel price adjustment.
How is fuel price adjustment determined ?
Economist Amar Habib Khan told the British News that a number of factors are used to determine the fuel cost adjustment but the most important is source of energy produced.
If a power plant uses coal it will be seen how much coal it used and at what price it was purchased ie total power generation from which energy sources & how much it cost.
For example if the electricity production by hydel has increased overall fuel price will decrease or if gas is used more in a month because its price is higher fuel price will be higher.
He further said that it is also affected by depreciation or improvement of rupee.
This is because coal LNG and furnace oil are imported so a depreciation or appreciating rupee has a direct impact on the overall cost.
According to a statement issued by Isco yesterday in this regard it also involves the non availability of cheap fuel for thermal generation.
Why is there a need to include FPA in bill ?
Ammar Khan says that the government used to give subsidies in the form of fuel price adjustment which led to budget deficits increased inflation & government had to take loans.
Now for the last 1 year it has been decided to put it in the bill itself whether negative or positive so that it gets adjusted.
Tahir Abbas says that until a year ago cost of fuel was not changing much but in the last few months prices of LNG & coal have started to increase significantly across the world.
However he said that in coming months prices are expected to decrease in global market & share of hydel in the energy mix will also increase so the total fuel cost is likely to decrease.
He further said that the fuel price adjustment is actually being done with a delay of 2 months which means that fuel price adjustment for the month of June will be seen in bill for the month of August.
In the coming months overall cost will come down as Hydel share increases.
fuel adjustment : Just like when you get more than expected marks in an exam even after looking carefully at the result card you can not believe that it is your result same is the case after the electricity bill that comes in August but this time the surprise is pleasant. no way.
When you look at the electricity bill you 1st blame the AC on the wall or the iron on the table but then when you look at the units used it not much more than last month.
On careful examination your eyes fall on the 3 letters of English FPA & you easily make a mistake by reading the amount written in front of it.
Looking at amount written under FPA i.e. Fuel Price Adjustment you ultimately blame the current government and not the electrical appliances or any householder for the bill.
Unfortunately this summer the story has become a household 1 & for the past 2 months, everyone has-been budgeting their homes thinking that the electricity bill is due. Not only this there have also been protests against electricity bills in different parts of the country.
On social media consumers are criticizing the extraordinary increase in electricity bill prices but at the same time electricity bill watchers are also raising questions about the FPA.
So what is this fuel price adjustment who determines it & how & is there no choice but to put the burden on the public?
Apart from talking to some experts in this regard we have also taken help from the announcement issued by ISCO yesterday.
What are the taxes on the bill & how much do they add to bill?
Keep in mind that not only fuel price adjustment but also various taxes are added to the bill. Mr Ammar Khan & Tahir Abbas point out that these taxes are added to the total value of the bill.
Amar Khan says If you ever look at a bill 30 to 32 per cent of it is taxes meaning when your unit price goes up & fuel price adjustment goes up your GST goes up because All these things are connected.
According to the announcement issued by ISCO taxes levied on electricity bill include 17 percent general sales tax electricity duty & income tax.
ISCO also said that the increase in fuel price adjustment was actually due to costlier furnace oil generation in May June which will gradually decrease after August.
People should collectively refuse to pay electricity bills.
The hike in electricity bills has seen strong reactions on social media & people are questioning the current government as to how they can pay such high bills.
In this regard pictures of electricity bills are being uploaded by consumers and videos of people protesting in different cities.
Journalist Ghareeda Farooqui tweeted about the horrible & unbearable unacceptable electricity bills of the people this month if we talk about justice people should collectively refuse to pay electricity bill.
This is oppression on the poor & middle class people. Commercial bills such as God refuge people are giving decades of business closure realize.
Pakistan Muslim League N Leader PML -N & Senator Asif Kirmani while writing details of his electricity bill says that the used unit is 198 while the bill is 10 thousand 412 rupees ie 52 decimal 58 rupees per unit. This is a 19 day bill because I was abroad from July 19 to August 5.
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User Mr Zeeshan Khan Niazi wrote that the electricity bills sent by this government will suffer in the elections. Do you even realize how much people have hated you?
User Mr Raja Faheem wrote that Mr. Prime Minister Shahbaz Sharif we are your workers. Just as the people are screaming because of your high inflation & the electricity bills are coming, after a few days the people will be on the streets & no 1 will even ask you if you will vote.
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