Fuel prices are variable, often changing very quickly due to international supply-demand factors and in response to global economic changes. The Fuel Charge Adjustment (FCA) is an approved adjustment allowed to electricity utilities by NEPRA on account of monthly variation in fuel prices, generation mix and volume Accordingly, there may be both positive as well as negative adjustments for FCA. FCA for each month is determined by NEPRA and these costs are passed through to customers in their monthly electricity bills following NEPRA’s scrutiny and approval. The notification issued by NEPRA for application of FCA includes details of the amounts and the months where FCA is to be applied. For example, FCA of March 2022 is to be applied in June 2022 as per NEPRA’s decision. Consumers also receive a benefit when the cost of fuel decreases. It is important to note that this is retrospective recovery of costs already incurred by KE in previous months. For more information, watch this explainer video: https://youtu.be/NBjANwfeKx0

FCA is determined by NEPRA for all DISCOs across Pakistan including K-Electric. FCA calculation mechanism is the difference between weighted average fuel cost per unit sent out for the month as compared to weighted average fuel cost per unit sent out for reference month i.e. last month of last quarter. Sample calculation formula for September 2021, along with extract from MYT for FCA mechanism is attached here

FCA varies based on fluctuations in prices of fuel used to generate electricity and change in generation mix and volume. The recent significant increase in global fuel prices as well as depreciation of PKR is one reason for higher FCA. In addition change in generation mix, due to dwindling supplies of indigenous Natural Gas have also contributed to the higher FCA in recent months (in April to June 22). When fuel price decreases as compared to reference month, the FCA also decreases.

You may see multiple FCA entries in your electricity bill between June-Sep 2024. This is in line with the schedule of charges applied by NEPRA; FCAs for up to three months will be applied in one month e,g. in June 2024 customers will see the FCA for both October 2023 and February 2024 being applied to the units consumed in those months. Similarly in August 2024 customers will see FCA for August 2023, November 2023 and December 2023 being applied. Please note that NEPRA has absolute authority over both the amount and the methodology of Fuel Charge Adjustments.

While, KE is strengthening its generation efficiency and advocating for rightful provision of cheaper indigenous gas to ease the burden of cost on the end-customers, Please remember that FCA is charged on the units you consume. Energy conservation is therefore, the swiftest and most effective route to managing personal energy costs. Follow @kelectricpk for energy saving tips.