NEPRA questions audit independence

Express Tribune

17-04-2025

Prior approval to NEPRA K-electric consumer may seen a huge relief over electricity bills. PHOTO: FILE
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A top-ranked independent auditing firm has verified the write-off claims of K-Electric (KE) as the auditors observed full compliance with international standards and complete independence from the KE management or board.
The National Electric Power Regulatory Authority (Nepra) on Thursday conducted a public hearing on KE's additional write-off claims of Rs8.131 billion.
"How will you satisfy that K-Electric auditors have done their work completely independently," Nepra chairman questioned during the hearing.
According to Nepra's requirement for the verification of write-offs, the claims were audited and verified by the top-ranked independent auditing firm, AF Ferguson, a member of PwC network.
The auditors, who were present during the hearing, assured the participants that they followed rigorous procedures, including on-ground verification, customer surveys, disconnection status assessments and photographic documentation.
They emphasised full compliance with international standards and complete independence from the KE management or board.
Former prime minister Shahid Khaqan Abbasi underscored that a timely and fair decision on KE's write-off claims would play a vital role in expediting the privatisation of power distribution companies (DISCOs).
Abbasi, who in the past headed the prime minister's task force on energy, reiterated that the unresolved write-offs continued to strain KE's financial position and impact investor perception.
He emphasised that the timely approval of prudent costs was critical; not only for KE sustainability but also for maintaining the credibility of the broader power sector.
Following the December 2024 hearing on KE's write-off claims, the additional amount pertains to the unrecovered dues from chronic defaulters that were identified after the submission of earlier claims.
The company said that despite rigorous recovery efforts, including disconnections and consumer engagement campaigns, the dues remained uncollected, reflecting the socio-economic complexities in its service territory.
It was highlighted that delays in processing those claims may risk undermining investor confidence and slowing the much-needed infrastructure upgrades essential for reliable power supply to Karachi.
The utility requested for timely and consistent regulatory decisions to maintain financial stability and ensure operational continuity.
KE Chief Financial Officer Muhammad Aamir Ghaziani recalled that the company had introduced refined methods for recovery post-privatisation and pointed to improvements in performance as transmission and distribution (T&D) losses dropped from 38% to 15.3%, falling within Nepra's T&D loss benchmark.
Rehan Javed from the Korangi Association of Trade and Industry echoed concerns over fairness and questioned why Karachi consumers were bearing the burden of Power Holding Limited's (PHL) surcharge despite no involvement of KE in circular debt.
He asked as to why they were paying billions in PHL surcharges for a debt they did not create, warning of potential consumer protests if the issues persisted.
Several other stakeholders called for ensuring broader transparency and the establishment of a sector-wide write-off mechanism applicable to all DISCOs, and not just KE.
Another participant commended Nepra on conducting the hearing on a pertinent subject and recommended a similar hearing on DISCOs' contribution to the circular debt.
Nepra Member Legal Amina Ahmed expressed dismay over the political representative's diversion from the topic and bringing irrelevant issues during the hearing.
Stakeholders like the Saylani Welfare Trust and civil society members acknowledged KE's on-ground recovery efforts and recommended the formation of joint working groups to manage recoveries.
They also highlighted the challenges such as the city's largely unplanned expansion and the on-ground risks faced by the KE field staff, including the incidents of violence during recovery drives.
Independent consultants drew comparisons with global markets, noting that utilities globally relied on similar write-off mechanisms due to the inherent unfeasibility of 100% recovery.
Energy adviser Omer mentioned that such mechanisms were not about rewarding inefficiency but preserving the financial viability of power utilities.
Nepra concluded the session by stating that the claims would undergo further examination and its determination would be issued after a complete review.
The outcome is expected to serve as a benchmark for future privatisation plans and tariff reforms in Pakistan's evolving power sector.