The NEPRA said on Friday that WAPDA’s hydropower generators would be paid an average tariff of Rs4.958 per unit, up from Rs3.85 per unit in the previous fiscal year 2022-23. The tariff increase will not affect consumers significantly, as it is a small addition to the overall electricity costs, which include various sources of power like oil, gas, coal, and renewables.

NEPRA also approved a higher water use charge (WUC) for Azad Jammu & Kashmir (AJK). WAPDA will now pay AJK Rs1.10 per unit on power generation from Mangla Dam and Neelum-Jhelum Hydropower project, the same as the net hydel profit (NHP) paid to theprovinces of Khyber Pakhtunkhwa and Punjab. This new tariff is for the previous fiscal 2022-23, earlier for FY22, the tariff was Rs3.85/unit. The Rs1.11 per unit generation tariff increase won't hit consumers hard; it's just a small addition to the overall electricity costs, which include various sources of power like oil, gas, coal, and renewables.

Earlier, for FY22, the water use charges for AJ&K were Rs712 million per annum, and now for FY23, it will increase to Rs5.44 billion. This indicates an increase of six-and-a-half times, to be precise, the increase will be 664 percent.

Khyber Pakhtunkhwa's (KP) share of NHP (Net Hydel Profit) has risen to Rs28.6 billion for FY23, a notable increase from Rs24.56 billion in FY22. Similarly, Punjab's share has also seen an uptick, reaching Rs11.65 billion for FY23, compared to Rs10.5 billion in FY22. The total hydel levies, encompassing all three stakeholders (KP, AJK, and Punjab), have surged to Rs45.9 billion for FY23, up from Rs35.9 billion in FY22.

According to the NEPRA’s decision, it had several times disallowed the increase in WUC to the Azad Jammu & Kashmir on the pattern of other provinces getting NHP. The authority argued that since under the constitution, AJ&K was not a province, Hence, it was entitled to water use charges (WUC) at a lower rate under the Mangla Dam agreement. The federal government had to facilitate a fresh agreement with AJK so that the regional government could be treated on a par with provinces for electricity payments. The authority also said that that payment of WUC to AJK was agreed in MoU signed at the time of Mangla Dam Raising Project therefore the same should first be amended.

According to the petitioner [WAPDA], a requisite amendment in Mangla Dam Raising Agreement of 2003 has been made which is notified vide MoWR letter dated 28 Feb 2022. Since the NEPRA requirement with reference to Mangla HPS (included in the generation license of WAPDA Hydroelectric) has been fulfilled, therefore payment of WUC to AJK on the generation from Mangla HPS has been proposed @ Rs.l.10/kWh at par with the NHP payable to the provinces.

The Amendment in the Mangla Raising agreement submitted by the Petitioner says that the WUC of Rs1.10 per kWh should be allowed to the AJK government on the Mangla Hydro Power Project prospectively as well as the Neelum-Jhelum Hydro Power Project, and any other future public sector power project, in AJK on a par with NHP paid to the provinces. Any future revision in the rate of NHP for provinces shall also apply to WUC for AJK. Also, the agreement required that WUC at the revised rate of Rs1.10/kWh shall be paid prospectively only, once the recovery through tariff begins after Nepra determination. The AJK would, however, not get any past claims.

Nepra has decided to apply the revised rate of WUC prospectively from the date of the amendment to Mangla Raising Agreement dated February 2022. Further, the authority has decided to apply the rate of Rs1.1/kWh with future indexations in line with NHP indexation. It added that it has also allowed WUC arrears amounting to Rs354.04 million for the period between Oct 18, 2021 and May 26, 2022 for which no WUC rate for Mangla was mentioned in the determination.

In fiscal year 2021-22, the approved revenue requirement stood at Rs 101.382 billion, while for fiscal year 2022-23, WAPDA had initially claimed a revenue requirement of Rs 123.316 billion. In its initial petition, WAPDA had requested a Rs 0.47 per unit increase for bulk power supply from its hydropower stations, taking it from the existing Rs 3.68 per unit to Rs 4.15 per unit. This was later adjusted upward to Rs 3.85 per unit due to various considerations.

NEPRA has now calculated a revenue requirement of Rs154.982 billion, which comprises Rs 109.247 billion for fiscal year 2022-23 and hydel levies amounting to Rs 45.735 billion. These levies encompass Rs 40.139 billion for regular net hydel profit, arrears of NHP, and water use charges (WUC) to provinces for fiscal year 2017-18, as well as Rs 5.440 billion for WUC and Rs 156 million in IRSA charges.

The per-unit impact of the increased revenue requirements will be Rs 1.11 per unit, representing a 29 percent rise.

In its order, NEPRA directed that the Power Purchase Agreement (PPA) should align with the tariff determinations of WAPDA hydro plants for fiscal years 2020-21 and 2022-23. Additionally, CPPA-G and WAPDA are instructed to sign PPAs for all WAPDA power projects currently in development, incorporating clear provisions for LDs (Liquidated Damages), RCOD (Required Commercial Operation Date), outages, technical specifications, testing protocols, and submit these to NEPRA for approval.