NEPRA imposes fixed charges on domestic consumers using up to 300 units per month

ISLAMABAD:

National Electric Power Regulatory Authority (NEPRA) has allowed the federal government to levy a fixed charge of up to Rs350 per month on domestic consumers – including protected one – using up to 300 units.

The regulator also allowed a reduction of up to Rs4.58 per unit and Rs1.53 per unit, respectively for different categories of industrial and domestic consumers.

Previously, only non-protected users consuming more than 300 units per month were subject to fixed charges, while protected domestic consumers were exempted from the charges.

However, as per the decision fixed charges will be extended to households consuming up to 300 units a month, including protected consumers. 

Similarly, for protected consumers, levying a fixed charge of Rs200 per/KW/month on the consumers using 1-100 units and Rs300/KW/month for those consuming 101-200 units was approved by the authority. 

For non-protected consumers, fixed charges of Rs275/KW/month for usage 1-100 units, Rs300 for 101-200 units and Rs350 for 201-300 units were approved by the regulator. 

“The revised tariff proposed by the federal government is within the determined consolidated revenue requirement of all the XWDISCOs and already budgeted TDS of Rs249 billion for 2026, the authority has no objection in approving the motion,” NEPRA said in its decision on the federal government motion for rationalisation of tariff of XWDiscos and K-Electric.

In its decision, the authority noted that present consumer end tariff design is volumetric in nature, whereby over 93% of the total system cost is being recovered on units consumed basis  and remaining 7% as fixed charge. On the other hand, capacity charges of generation companies, NTDC/ HVDC costs are fixed costs, which are required to be paid monthly, irrespective of electricity consumption by the consumers. 

These fixed costs, accounts for significant portion of total revenue requirement of distribution companies. Thus, there is a mismatch between incurring of cost (fixed in nature) and its recovery mechanism (consumption based). 

The plan also provides that fixed charges shall be progressively incorporated in the tariffs of all consumer segments, which shall account for at least 20% of the fixed cost. With rapid penetration of rooftop solar and other renewable energy sources, grid-based electricity demand is declining. This shift has necessitated to gradually move away from volumetric nature tariff towards a more fixed cost-oriented tariff structure. 

Accordingly, fixed charges have been levied / revised on domestic consumers, other than lifeline consumers, ranging from Rs200/kW/ month to Rs675/kW/month. 

For domestic consumers, above 300 units & ToU consumers, the increase in fixed charges has been off-set by corresponding reduction in their variable charge. The amount so recovered through fixed charges has been utilized to reduce the existing cross subsidy of industrial consumers, and resultantly, their variable rate has been reduced ranging from Rs1 per unit to Rs.4.58 per unit for different categories.

The proposed revision of the applicable uniform tariff is within the determined requirement of XWDISCOs and already budgeted Tariff differential subsidy (TDS) of Rs249 billion, the decision said.

With the recent increase of up to 100 per cent in fixed charges and levying of fresh fixed charges on  some categories of domestic consumers-including protected consumers- will help the government to collect an additional Rs132 billion annually. It is projected that with the revised mechanism the federal government collection on account of fixed charges will increase to Rs355 billion from the existing Rs223 billion. 

However, the net impact on the cross subsidy will be Rs101 billion as the government has reduced the tariff by up to Rs1.53 per unit for various categories of domestic consumers for the CY2026. The government is presently paying Rs629 billion annual subsidy/cross subsidies to various categories of consumers, which will be reduced to Rs527 billion through the imposition and revision of fixed charges, the official said. 

The decision will help scrapping the Rs102 billion (Rs4.04/unit) cross-subsidy paid by industry to domestic consumers. To cover the deficit, fixed charges will be imposed on previously exempt residential consumers, and existing charges for other domestic users will be increased by up to 100%.

NEPRA also allowed 100 percent increase in fixed charges for non-protected consumers using 301–400 units which will rise to Rs400/KW/month from earlier Rs200/KW/month, while those consuming 401–500 units would pay Rs500/KW/month against previous Rs400/KW/month. For users consuming 600 units, fixed charges would increase to Rs675/KW/month from earlier Rs600/KW/month.

However, for upper slabs of consumers using above 601 units per month, some relief is approved by the regulator. Fixed charges for up to 601-700-unit would be reduced by Rs125 to Rs675 from the earlier Rs800, while those consuming more than 700 units would see a reduction of Rs325, also bringing their fixed charge to Rs675 from Rs1000.

The regulator also allowed reductions in per-unit tariffs for domestic consumers. Households using 400 units would get a relief of Rs1.53 per unit, while those consuming up to 500 units would see a cut of Rs1.25 per unit. For 600-unit consumers, the proposed reduction is Rs1.40 per unit.

Users consuming 700 units would receive a reduction of Rs0.91 per unit, and those using more than 700 units would get a cut of Rs0.49 per unit.

The decision is being intimated to the federal government for the purpose of notification within 30 calendar days from the intimation of the decision, said NEPRA, adding that if the federal government fails to notify the subject tariff decision within the time period, the authority shall notify the same in the official gazette.