Formula to hike energy tariff being worked out

electricity rateKATHMANDU, APR 07 – The government has begun work to implement an automatic energy tariff hike system as per which the electricity charge will rise by 5 percent annually.
The Electricity Tariff Fixation Commission (ETFC), which has been working to come up with a formula to compute the automatic tariff hike, said it was also planning to introduce rates based on season from the next fiscal year.
Though the ETFC Regulation allows it to hike the electricity tariff by 5 percent annually based on a standard formula, it has not been able to do so as it has not developed such a scheme.
In June last year, the commission had decided to hike the electricity tariff by 20 percent on an average effective from July 16, the beginning of the fiscal year 2013-14. This is the first price increase in 11 years.
“Once the formula has been developed, the tariff will be hiked automatically,” said ETFC head Ganesh Bahadur Subba. According to him, the formula will help to raise the rates in an easier and more scientific and transparent way.
The commission at present is preparing the terms of reference (ToR). It will be able to develop the formula after it is approved. “The ToR is almost at the final stages, and we will soon form a high-level technical committee or a group of experts to develop the formula,” added Subba.
According to him, the formula will be developed on the basis of various scientific factors including the consumer price index, inflation, industrial productivity, power purchase rate (PPA) for developers, impact on power consumers and the exchange rate of the US dollar. “However, we will not be able to increase the tariff by more than 5 percent annually despite the formula,” said Subba.
The Nepal Electricity Authority (NEA) has sought to hike the energy tariff citing its weak financial health. Once the formula is developed, uncertainty over the hike and by how much is also expected to be resolved.
The commission has also planned to introduce a seasonal power tariff once the formula has been established. Due to higher production and lower demand during the wet season and higher demand and lower production during the dry season, the NEA had been requesting the commission to introduce a dual tariff system.
“The lower rate during the wet season will encourage consumers to use more energy while the higher tariff during the dry will induce them to use it reasonably,” said Subba.
Once the formula has been developed, the commission will hold discussions with the NEA, Energy Ministry, industrial consumers and stakeholders before implementing it. Though the ETFC lacks funds to develop the formula, it expects to implement it by the middle of the next fiscal year.
Source : The Kathmandu Post