Electricity distribution companies seek security deposit revisions due to tariff hike

Pakistan's electricity distribution companies (Discos) have filed petitions to revise consumer security deposit rates, citing significant increases in electricity tariffs.

The current security deposit rates, based on 2010 tariffs averaging PKR 9.2/kWh, are deemed inadequate to protect Discos against potential defaults.

Under the existing structure, security deposits range from PKR 610 to PKR 3,560 per kW across various categories. The proposed changes would align deposits with the increased average tariffs, now PKR 24.72/kWh — a 268% increase.

The new structure suggests 2.5 months' billing for all consumers except urban domestic, who would face a three months' billing requirement for properties up to 10 marlas and 1% of land value for properties over 10 marlas.

For instance, small industries would see deposits rise from PKR 1,580 to PKR 51,348 per kW for 2.5 months.

Petitions have been filed by all distribution companies excluding K-Electric Limited.

The Discos also propose setting temporary connection tariffs at 1.5 times the regular rates, such as PKR 64.08/kWh for residential consumers, with fixed charges applied for loads exceeding 5 kW.

This marks a significant increase from current rates like PKR 35.41/kWh for industrial temporary connections, potentially discouraging temporary use in construction and events.

The proposed adjustments align with NEPRA guidelines, which allow deposits up to 2.5 months’ consumption to safeguard against defaults. However, the increased upfront costs may impose a high financial burden on industries, especially small and medium enterprises (SMEs), affecting their competitiveness and liquidity. Additionally, higher fixed charges for temporary connections could penalize industries requiring short-term setups.

The drastic increases could lead to consumer backlash, deter new connections, and raise dissatisfaction. There are also concerns about equity, as sanctioned load-based charges for temporary connections may unfairly impact low-usage consumers.

Moreover, the increased costs for businesses could cascade into higher production costs and inflation.

Analysts say while the proposed changes aim to mitigate financial risks for Discos, they risk overburdening consumers and stifling industrial growth. A more balanced approach is needed to protect both Discos and industries.