Relief for consumers?

FAC is being lowered after overcharging in first quarter

 Consumers are likely to get Rs 1.75 per unit deducted from the Fuel Adjustment Charge surcharge for the third quarter, from July to September. That is reflecting Rs 94 billion extra which have been charged from the consumer in bills up to April, and which are now to be refunded. As the refund is going to come at a time when consumers, especially domestic and commercial, turn on ACs, fans, room coolers and other cooling devices, this represents substantial relief. It also provides a modicum of relief for industrial consumers, including the textile industry, which spearheads the country’s exports, and which has not only been voicing deep concerns about the power tariff, but also the frequent loadshedding and ever present outages. The tariff cut does not solve the loadshedding issue, which will be solved, according to the Power Minister, with the arrival of RLNG cargoes, as that will allow the RLNG-operated plants, which have run out of fuel, to get back into production.

This ties in with something the PM had earlier said at a meeting on the power sector, that those distribution company officials who did not observe the Economic Order of Merit, were to be punished. With all power plants listed according to their unit cost (depending on their fuel and how they were using it), it is up to the DISCOs to choose the mix costing the least. That cost is what the consumer is billed, so if the DISCO was to make the wrong choice, it is the consumer who will pay. Similarly, the wheeling system which is to be introduced for industrial consumers, it will be up to the consumer to choose the DISCO which offers the best rate.

It should  be noted that this FAC adjustment covers the first month of the US and Israeli attack on Iran, and thus covers the rise of oil prices. It seems that they are now falling, perhaps because there is some hope that the USA and Iran may be approaching some agreement. Prices of Brent crude futures settled at $101 on Wednesday, and went down below the psychologically crucial $100 level on Thursday, both an indication that a settlement seemed round the corner, as well as the general sentiment that operations were no longer sustainable. If this trend is sustained, it is possible that the FAC may see some further savings in the future.