Tariff hike, leakage control unlikely to help NEA improve balance sheet

Kathmandu, June 24

Nepal Electricity Authority (NEA) — the sole power off-taker of the country — is expected to face a loss of around Rs 7.97 billion in this fiscal year as compared to a loss of Rs 8.90 billion in the previous fiscal.

The status report of state-owned enterprises for 2017 has estimated NEA’s loss to hover around Rs 7.97 billion. The loss amount estimated by the power utility for this fiscal is only around Rs one billion less than the previous fiscal despite hike in tariff rate since August last year.

The Electricity Tariff Fixation Commission (ETFC), on the recommendation of NEA, had raised the tariff by around 15 percent on average, which generated additional revenue of around Rs five billion for NEA.

The power utility had previously announced that it would be able to reduce its loss substantially through the tariff hike and leakage control.

NEA Managing Director Kulman Ghising has informed that NEA generated Rs 1.25 billion from leakage control in the first six months of this fiscal and has a target to generate additional Rs 1.25 billion in the remaining six months through leakage control.

NEA’s revenue is expected to increase by Rs seven billion as compared to the previous fiscal through tariff adjustment and leakage control. However, the power utility said that the increased cost of electricity purchase — around 150 megawatts of power has been connected to the central grid since the dry season — and increased administrative costs are the major reasons for an equal quantum of loss as compared to the previous year.

If NEA incurs a loss of Rs 7.9 billion in this fiscal as estimated, the power utility’s cumulative loss will hover around Rs 42.62 billion. Against this backdrop, NEA has again started homework to recommend ETFC for tariff hike to recover its loss. As per NEA sources a proposal to hike tariff by around 22 per cent is under discussion, which will be sent to the NEA board very soon. NEA board will then recommend the ETFC, which comprises of members representing consumers and the private sector, for a tariff hike.

NEA, which is planning to resort to tariff hike as the ultimate option to improve the financial health of the entity, has overlooked leakage control, which could be instrumental in reducing its loss. Data reveals that 24.28 per cent of the total supply is lost due to leakage.

NEA has been losing revenue of around Rs 17 billion (based on the existing tariff structure) annually due to electricity leakage. It is reported that it is not possible to completely control leakage, but a lot could be saved by making the distribution system robust.

Source: The Kathmandu Post