Latest news with #FuelCostAdjustment
Express Tribune
30-06-2025
- Business
- Express Tribune
NEPRA grills Power Division over FCA deferral
The National Electric Power Regulatory Authority (NEPRA) held a heated hearing on the Power Division's request to defer April 2025's Fuel Cost Adjustment (FCA) of Rs4.69 per unit for K-Electric (KE) consumers. The proposal drew sharp criticism from NEPRA members and Karachi's power consumers, who questioned both its legality and timing. NEPRA Member Legal Amina Ahmed criticised the Power Division's abrupt change of stance, noting that the reference price of Rs15.99 had remained unchanged for two years. She argued there was no legal or practical basis for the deferral and called out the ministry for its delayed response. When asked about policy guidelines and cabinet approval, the ministry's representative gave a 10 to 15-day timeline. KE's representative informed the regulator that Rs7.173 billion in relief was due to be passed on to consumers, noting that the utility had offered negative FCA adjustments since September 2024. The Power Division argued that deferring the FCA was necessary to safeguard the federal budget, warning that immediate implementation could place further fiscal strain on public finances. NEPRA, however, dismissed the plea, stating that it lacked legal merit and procedural basis. NEPRA Senior Legal Advisor Ahmed Ibrahim asserted that NEPRA held exclusive jurisdiction over tariff matters. He said no court order existed to halt the process and that the ministry's petition was premature. Without a stay order, NEPRA's earlier determination remains binding. He further clarified that the Ministry of Energy's administrative role did not entitle it to interfere in regulatory decisions. NEPRA chairman echoed these sentiments, noting the hearing had been scheduled in advance and the deferral request came too late. He questioned why the legal process hadn't been followed earlier. KE CEO Moonis Alvi said KE would comply with NEPRA's decision but urged that fairness be considered. He added that industrialists planning production and exports faced uncertainty due to the ambiguity. Karachi-based industrialist Rehan Javed said the Power Division never objected when positive FCA adjustments led to higher tariffs for Karachi. He called the sudden concern selective and biased, pointing out that Karachi consumers also paid the PHL surcharge despite not contributing to the circular debt. He reminded NEPRA of International Monetary Fund (IMF) demands for timely tariff adjustments and greater efficiency. Javed stressed that any subsidy settlements between the government and KE were unrelated to the current FCA issue and demanded NEPRA act independently. He added that while Karachi stood to gain this time, it had often borne the brunt of losses in the past. Participant Arif Bilvani voiced frustration over the Power Division's belated intervention. He argued that Karachi consumers deserved the relief now, just as they had borne excessive charges earlier. KCCI representative Tanveer Barry called the Power Division's objections "unfair," highlighting that Karachi was being penalised despite not contributing to the circular debt. The session concluded with NEPRA reaffirming that decisions must be made transparently and free from ministry pressure. A final ruling is awaited and is expected to have wide implications for Karachi's power consumers. DISCOs tariff may rise Rs1/unit Separately, NEPRA also held a hearing on the May 2025 FCA request for DISCOs, in which the Central Power Purchasing Agency (CPPA-G) warned that power tariffs could rise by up to Rs1 per unit from July 1 due to increased gas prices for power generation. CPPA-G initially sought a 10 paisa per unit increase for May, which NEPRA said it would consider after reviewing the data. According to CPPA-G, the 10 paisa hikeif approvedwould be applicable for one month only and add Rs1.25 billion to consumer bills. The reference fuel cost for May was Rs7.39/unit, compared to Rs7.49/unit in April. CPPA officials warned that higher gas prices would likely push tariffs up by Rs1 per unit. They also cautioned that without improved bill recoveries, the government may resort to raising surcharges to manage the ballooning circular debt. Currently, consumers are paying a Rs3.23 per unit surcharge solely for interest payments on circular debt. This amounts to Rs323 billion annually. According to CPPA-G data, actual fuel cost for May was Rs7.4940 per kWh, while the reference cost was Rs7.3925an increase of Rs0.1015/unit.
Business Recorder
26-06-2025
- Business
- Business Recorder
Negative FCA for KE consumers: KATI concerned over delay in implementation
KARACHI: Junaid Naqi, President of the Korangi Association of Trade and Industry (KATI) has voiced strong concerns over reported efforts by the Ministry of Energy (Power Division) to delay the implementation of the negative Fuel Cost Adjustment (FCA) for April 2025 for K-Electric consumers. He warned that these attempts, which lack legal and procedural basis, could sabotage the Prime Minister's reform initiatives. 'The FCA must be determined and implemented in accordance with NEPRA's formula-based regulatory framework,' said Naqi. 'Blocking its application solely for Karachi raises serious questions about regulatory independence and sets a troubling precedent of administrative overreach.' Naqi pointed out that in the past, when FCA charges were higher, the people and industries of Karachi paid the additional costs without delay. 'Now, when the relief is finally due, obstacles are being placed. This selective treatment is unjust and erodes public trust in the government's reforms,' he added. He further clarified that unless a uniform FCA policy is formally approved by the federal cabinet and directed to NEPRA, no intervention holds legal validity. Even if approved, such a policy can only be applied prospectively, not retroactively. President KATI called for the transparent, fair, and timely implementation of all regulatory decisions and urged the government to allow NEPRA to function independently. Junaid Naqi stressed the need for equal treatment of all consumers including those in Karachi and reaffirmed the importance of upholding the rule of law. He welcomed Prime Minister Shehbaz Sharif's recent move to reduce electricity tariffs for industrial consumers, calling it a timely and commendable step. Junaid Naqi said the decision reflects the government's commitment to supporting Pakistan's export sectors and driving industrial growth during a time of economic uncertainty. Copyright Business Recorder, 2025
Business Recorder
26-06-2025
- Business
- Business Recorder
No Apr FCA for Karachiites: Trade bodies demand Nepra reject PD plea
ISLAMABAD: In protest against the Power Division's intervention to block the application of negative Fuel Cost Adjustment (FCA) for April 2025 for Karachiites, several trade associations have written to the National Electric Power Regulatory Authority (Nepra), demanding that any such request be rejected outright. Letters of protest have been submitted by the Bin Qasim Association of Trade & Industry, the Pakistan Association of Large Steel Producers (PALSP), the Pakistan Tanners Association, and industrialist Rehan Jawed. During a public hearing on June 23, 2025, regarding K-Electric's FCA for April 2025, the Power Division presented a letter to Nepra, requesting a deferral of the hearing on the grounds that the government is preparing to implement a uniform FCA across the country. 'New electricity provider in Karachi': NA panel underscores need for exploring possibility The business community has raised a series of detailed legal and procedural objections, urging Nepra to consider them immediately. The Associations argue that the Ministry of Energy, as part of the executive branch, has no lawful authority to interfere in NEPRA's quasi-judicial proceedings or to delay statutory processes. Citing Sections 3 and 7 of the NEPRA Act, they emphasized that Nepra is mandated to function independently and is not subject to executive directives once a determination has been made. They maintain that the FCA is a formula-based, mechanical adjustment and that any interference is both unwarranted and illegal. The business community points to Nepra's own determination dated May 27, 2025, in the K-Electric Multi-Year Tariff (MYT) case, which clearly stated:'To maintain consistency and avoid revisions to already determined FCAs, and to ensure no additional burden is placed on consumers, the Authority has decided to allow the reference FCC of Rs. 15.9947/kWh on a units-served basis for each month of FY 2023-24.' They argue that this constitutes a binding precedent and cannot be overturned without following due legal process. The Ministry's unilateral request, they claim, has no legal merit and contradicts this established order. The Associations further state that no cabinet approval has been granted for a revised uniform tariff structure. Therefore, unless and until such approval is formally issued and notified under the relevant legal framework, NEPRA's existing FCA mechanism—based on the approved reference fuel cost—must continue. They also cited a Supreme Court judgment in Anoud Power Generation vs. WAPDA (PLD 2001 SC 340), which ruled that even if the cabinet later approves a tariff mechanism, it cannot be applied retrospectively unless specifically authorized by law. According to the associations, the Power Division's letter is no more than a recommendation and lacks any statutory authority to override Nepra's determinations or delay implementation. They emphasized that FCA adjustments are governed strictly by Nepra's Standard Procedures and the Tariff Rules, and any delay violates the requirement for timely adjustments, which are also commitments under the IMF's Memorandum of Economic and Financial Policies (MEFP). 'The Power Division's argument about subsidy management is without merit,' stated the Bin Qasim Association of Trade & Industry. 'K-Electric has already underutilized the allocated subsidy in the 2024–25 federal budget due to better recovery rates and cheaper electricity imports from the NTDC. The fiscal impact argument, therefore, lacks substance, and consumers should not be penalized for executive-level fiscal concerns.' The associations are calling on Nepra to hold an open hearing on the Power Division's letter and its proposed deferral, allowing all relevant stakeholders—especially industrial consumers in Karachi—to be heard. They argue that the principle of audi alteram partem (the right to a fair hearing) must be upheld. 'Until a new Cabinet-approved benchmark or uniform tariff is formally notified, the existing FCA reference cost of Rs. 15.9947/kWh remains legally binding. There is no justification for any executive override or temporary deferral—particularly when it would delay relief to consumers,' the associations stated. They further expressed frustration over what they perceive as selective intervention by the Power Division. 'When consumers in Karachi were burdened with higher FCAs and demanded a uniform rate, the Ministry ignored our concerns. Now, when the FCA is lower for Karachi and offers relief, the Ministry is actively trying to block it. This double standard is unacceptable and deeply troubling,' they added. The associations stressed that implementing a uniform FCA at this stage requires formal cabinet approval and a corresponding direction to NEPRA. In the absence of such legal backing, neither the Ministry of Energy nor the Central Power Purchasing Agency (CPPA) has the authority to interfere. 'We urge Nepra to reject the Ministry's request and proceed with the timely implementation of the negative FCA for K-Electric consumers in accordance with the law,' said PALSP. 'Any deviation would not only undermine the sanctity of the regulatory process but also violate consumer rights and established judicial precedent.' They also called for a requirement that any future Ministry communications affecting tariff mechanisms be subject to public and stakeholder hearings before implementation. Copyright Business Recorder, 2025
Business Recorder
25-06-2025
- Business
- Business Recorder
Karachi
Karachi appears to be Pakistan's orphaned child. Once the country's capital, it now holds the dubious distinction of being among the most unliveable cities in the world. Despite contributing over 20% to Pakistan's GDP and hosting around 10% of the nation's population, Karachi struggles significantly to complete critical projects like the BRT and K-4 water supply schemes. Videos highlighting its crumbling infrastructure became memes during the recent India-Pakistan clash, which speaks volumes. For decades, Karachi has absorbed a continuous influx of migrants from various regions of Pakistan, expanding rapidly and without adequate planning, thus becoming a hub for crime and unrest. Despite these challenges, the city has remained Pakistan's economic backbone, functioning as the nation's industrial centre and sole significant link to the global supply chain for seven decades. In short, Karachi has the potential to pull Pakistan out of its financial difficulties with minimal effort—provided it receives proper attention and prioritization. Instead, it consistently receives minimal support. Political parties routinely stage protests against the federal government for neglecting Karachi, yet minor changes. Consider the energy sector, for instance. Karachi hosts the country's only privatized power utility, K-Electric (KE). According to recent communications, KE has become the most improved DISCO since 2009 regarding transmission and distribution losses, reducing its aggregated technical and commercial losses from a staggering 43.2% to approximately 20.3% by 2024. Within Karachi alone, the exempted feeder network increased dramatically from a mere 6.6% to 70%. These achievements, supported by a complete management turnaround, have gained global recognition, including a Harvard Business School case study and positive World Bank reports. However, despite these notable improvements, KE faced significant setbacks, such as delays in the Multi-Year Tariff determination, hindering its financial planning. The private utility, intended as a model for other DISCO privatizations, was inexplicably left in limbo, ultimately punishing Karachi residents more than the company itself. Another example is the denial of Fuel Cost Adjustment (FCA) relief—a substantial amount of Rs4.69 per unit—to KE's customers in a recent NEPRA hearing. The justification given was to maintain a uniform tariff across the country, exemplifying bureaucratic rigidity and the shortsighted decisions of temporary ministers. Karachi is also burdened with inefficiencies from other DISCOs. For nearly two years, Karachi's consumers have borne the Power Holding Limited (PHL) surcharge—debt repayment they did not contribute to or benefit from. Now, due to a new banking agreement, this surcharge is extended for another six years, meaning 72 more months of inflated electricity bills for Karachi residents. Even if the government manages to find buyers for its other DISCOs—a considerable challenge—the current treatment of KE sends a negative message. Potential buyers witnessing such hurdles and neglect may reconsider their interest, fearing similar treatment. Karachi deserves better.
Business Recorder
31-05-2025
- Business
- Business Recorder
PMO asks PD for recovery-based loadshedding update
ISLAMABAD: The Prime Minister's Office (PMO) has sought an update from the Power Division on its proposed policy to legalize recovery-based loadshedding, amid continued penalties imposed by the National Electric Power Regulatory Authority (Nepra) on Distribution Companies (Discos) and K-Electric for implementing such load management practices in violation of regulatory laws. This initiative is part of a broader reform agenda assigned to the Power Division by the Prime Minister, aimed at removing legal barriers to unscheduled power load shedding across the country. However, the Ministry of Finance (MoF) has expressed reservations about the plan. It argues that while load shedding may help avoid high electricity costs in low-recovery areas, the government remains liable for capacity payments on unutilized electricity—making the overall economic rationale questionable. HCSTSI condemns HESCO over increased load-shedding At a public hearing on Fuel Cost Adjustment (FCA) last year, Nepra Chairman Chaudhry Waseem Mukhtar confirmed that revenue-based load shedding is currently illegal, which is why the regulator is penalizing utilities for enforcing it. He suggested that the government must legalize the practice if it intends to continue its implementation. Following the Chairman's remarks, the Power Division began drafting a proposal titled 'Amendments in Legal Framework to Implement Economic Load Management in the Country.' The proposal aims to embed recovery-based and Aggregate Technical and Commercial (AT&C) loss-based load shedding into the legal and regulatory structure. According to the Power Division, Prime Minister Shehbaz Sharif chaired a series of meetings on April 15, 18, and 25, 2024, during which he directed the division to review and suggest necessary amendments to existing laws and policies. A committee comprising representatives from the Private Power and Infrastructure Board (PPIB), Central Power Purchasing Agency (CPPA), Law Division, Nepra, and independent legal experts was formed to carry the initiative forward. The Power Division circulated a draft summary to relevant ministries for feedback before submitting it to the Economic Coordination Committee (ECC), Cabinet Committee on Energy (CCoE), or the federal cabinet for approval. In its feedback, the Finance Ministry noted the summary lacked empirical data to substantiate the claimed benefits. It stressed that while load shedding in high-loss areas may be justifiable to an extent, the fiscal impact of paying for idle generation capacity remains a major concern. The Power Division, however, maintains that Discos are compelled to implement load shedding in high-loss areas due to economic constraints. With rising electricity costs from the central power pool, continuing to supply expensive power to areas with poor recoveries is financially unsustainable. Therefore, it argues, a structured and legally sanctioned load shedding mechanism is essential for the sector's financial viability. Nevertheless, sources suggest that Nepra remains opposed to the proposed amendments and has raised serious objections. The Finance Division reiterated its stance, emphasizing the need for the Power Division to present a detailed comparative analysis of the economic trade-offs involved. The Cabinet has asked the Power Division to clearly explain the advantages of such a policy, particularly in terms of cost avoidance and system sustainability. Copyright Business Recorder, 2025
