K-Electric write-offs: NEPRA allows Rs50 billion as ‘full and final claim'

Business Recorder

2 days ago

The National Electric Power Regulatory Authority (NEPRA) on Thursday issued its decision on K-Electric's (KE) write-off petition, allowing Rs50 billion as 'full and final claim' against the company's claims worth Rs76 billion pertaining to the Multi-Year Tariff (MYT) control period spanning FY17–FY23.
The authority had reserved the decision on KE's plea last month.
'The authority hereby approves Rs50,013 million on account of write-offs pertaining to the billing of MYT 2017-2023 for K-Electric as full and final claim in line with the write off criteria stipulated in the final determination against write-off claims of Rs76,033 million,' the NEPRA said in its order.
Source: NEPRA
'The authority, while allowing the write-offs is conscious of the fact that all possible efforts have already been made by K-Electric, as confirmed by the auditors.
'However, in the interests of the consumers, KE is directed to continue to actively pursue the recovery of the maximum possible amount. In case a written off amount is subsequently recovered by KE, the benefit of such amount shall be passed on to the consumers in the immediate quarterly adjustments and KE shall be required to separately disclose this amount,' the order read.
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The NEPRA further said KE shall also be required to submit certificate from its auditors each year, clearly mentioning the recovery of written off amounts, if any, pertaining to MYT 2017-2023.
'….out of the requested write-offs of Rs76,033 million, approximately Rs24,337 million pertains to the previous MYT period before July 1, 2016. The previous MYT was performance based and losses were to be borne by KE and gains, if any, beyond allowed limits were subject to claw back mechanism.
'The write-off mechanism in no way allow KE to claim write-off of the previous MYT. Allowing write-offs of the previous MYT will be a clear duplication of cost. Therefore, there is no justification to allow write-offs of Rs24,337 million pertaining to the previous MYT period and the same is being set aside and disallowed,' the order read.
According to KE, additional claims between FY17 and FY23 were related to unrecoverable dues against chronic defaulters filed by the utility. KE is allowed to claim these costs in the Multi-Year Tariff awarded to the utility, which is independent of the rates of electricity charged to customers in monthly bills under the uniform tariff policy.
'With this decision, majority of items pending to the previous control period have come to a close. KE looks forward to the MYT for the control period spanning FY 24 to FY 30, committed to meeting its serviced territory's energy needs,' KE CEO Moonis Alvi said.
During the hearings on the KE's plea, majority of the stakeholders had objected the additional and pending write-off claims. The representative of Jamaat-e-Islami (JI) had raised the issue of 'bogus bills' which they said had been subsequently claimed as write-off. Representatives of the city's business communities had also raised concerns similar concerns.
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K-Electric filed its integrated MYT petition on March 31, 2016, requesting determination of MYT for a period of ten years commencing from July 01, 2016 to June 30, 2026. The said petition was decided by the authority, vide determination dated 20.03.2017, allowing KE a MYT for a period of seven years from July 2016 to June 2023.
Privatised in 2005, KE is the only vertically integrated power utility in Pakistan supplying electricity to Karachi and its adjoining areas.
The approval of the claims had been termed critical by the utility for its financial sustainability.
Last month, the NEPRA approved KE's new MYT for transmission and distribution (T&D) network segments for FY2024 to FY2030 (MYT Period). Later, the authority also approved the utility's new MYT for the supply segment for the same period.