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Explained: Pakistan’s fuel adjustment charges

31 May, 2022
<p>A technician fixes new electricity meters at a residential building in Karachi, Pakistan, on May 13, 2010. AFP/File</p>

A technician fixes new electricity meters at a residential building in Karachi, Pakistan, on May 13, 2010. AFP/File

Fuel adjustment charge is a system by which the price of electricity in Pakistan is adjusted as fuel prices fluctuate.

Fuel prices in Pakistan mimic global oil prices. And because electricity-producing companies in Pakistan import fuel, power sector regulator Nepra has to set the price of electricity according to fluctuations in fuel prices.

So if the price of oil goes up, so too does the fuel cost adjustment charge. During the previous PML-N government, the fuel adjustment charge (FCA) was negative at times as oil prices fell.

Since oil prices are volatile, power firms are told to charge a specific amount for power generation at the beginning of the month. Towards the end of the month, the companies begin preparing petitions to make up the difference borne on account of change in oil prices. The difference is fuel price adjustment which is taken from consumers in the later months.

Ultimately, the consumer is the sole payer for the electricity and its charges.