Electricity tariff hike by mid-July 2012

KATHMANDU, MAY 14 -

The Electricity Tariff Fixing Commission (ETFC) is prepared to hike the retail electricity tariff by an average of 20 percent by mid-July with some conditions for the Nepal Electricity Authority (NEA), officials said.

ETFC officials said they may require the NEA to reduce leakage by 4 percent and improve internal governance in exchange for allowing it to jack up the rates.

The issue of revising the electricity tariff has been pending for over 11 years, and has been a matter of dispute in the hydropower industry.

“We’ve finalised the details and are likely to take a decision to make the new tariff rates effective from the beginning of the next fiscal year,” said Ganesh Pd Subba at a programme on electricity tariff organised by the Hydropower Association of Nepal and Niti Foundation on Sunday.

Subba confirmed that they were planning a hike of around 20 percent. Earlier, the ETFC had approved raising the tariff by 20 percent for both household and industrial consumers in March. Currently, the power tariff is Rs 7 per unit. The hike will help the NEA to cut its losses which stand at Rs 7 billion annually. Experts said that though the tariff revision should not be viewed as a measure to bail out the NEA, it would improve the financial health of the state-owned entity and enable it to purchase power from independent power producers at a competitive rate, thereby attracting more investment.

Minister Designate and former Minister for Energy Post Bahadur Bogati said the ETFC has formed a revised tariff structure after a series of consultations with the ministry, and it would be announced soon. “The new tariff structure will be announced soon, and I assure full support for its implementation from my side,” said Bogati. Some ETFC members, however, cautioned that it would be disastrous if the tariff was hiked without holding anybody accountable for a number of crucial reforms within the NEA. The NEA has been without an MD for months now, and hiking the tariff will not be justified without first determining who will be accountable for reforms, said ETFC member and joint secretary at the Energy Ministry Arjun Karki.

NEA director Jayandra Shrestha said there was little opportunity for the NEA to cut its losses through internal reform as most of its expenses were unchangeable, such as regular amounts for purchasing power and interest payments to banks. Shrestha said that a revision of the 11-year-old tariff was a must as prices of other fuels had risen manyfold besides high inflation.The business community said that  the increased tariff would not be a problem if it would help NEA generate and supply sufficient power. “We have already pledged in writing to the government to pay up to Rs 15 per unit if there is uninterrupted supply,” said FNCCI representative Gyanendra Lal Pradhan.

l    Tariff hike to be conditional

l    NEA must pledge some reforms

l    NEA demands automated annual adjustments

Source: The Kathmandu Post