Latest news with #K-electric
Express Tribune
23-05-2025
- Business
- Express Tribune
NEPRA okays Rs3.84/kWh tariff for KE
Prior approval to NEPRA K-electric consumer may seen a huge relief over electricity bills. PHOTO: FILE The National Electric Power Regulatory Authority (Nepra) has approved a distribution tariff of Rs3.84 per kWh for K-Electric for the fiscal years 202324 through 202930. K-Electric had requested a transmission tariff of Rs2.99 per kWh along with the Rs3.84 per kWh distribution tariff. These decisions were made following detailed public hearings, technical evaluations, and feedback from a broad range of stakeholders, including industry representatives, consumer groups, and public forums. The authority had earlier issued its decision for KE's generation tariff in October 2024. The tariff determinations do not directly impact end-consumer rates, which are governed under the uniform tariff policy notified by the federal government. K-Electric had submitted tariff petitions for generation, distribution, transmission, and supply businesses following the expiry of its previous Multi-Year Tariff (MYT) in June 2023. The new MYT spans seven years and is designed to provide long-term financial clarity essential for capital investment and operational stability. The power utility proposed a distribution tariff for FY 202324, covering components such as return on rate base (RoRB), operations and maintenance (O&M), amortization, and working capital. NEPRA evaluated several critical factors, including KE's request for a USD-pegged return on equity (RoE) at 16.67%, indexing mechanisms for losses and capital costs, and one-time adjustments tied to the previous MYT period (201723). The RoE of 14% has been allowed in principle with indexation. Industry representatives called for shorter control periods with performance-linked penalties. NEPRA did not allow KE's request to adjust distribution loss targets based on changes in its sales mix across voltage levels. The regulator maintained that performance benchmarks must be uniform across the sector, and KE's approved loss targets would remain unchanged despite its argument that shifting sales mix dynamics warrant reconsideration. Accordingly, annual loss reduction targets were fixed and must be achieved without upward revisions, reinforcing accountability and performance discipline. In terms of capital structure, NEPRA maintained a notional 70:30 debt-to-equity ratio for both tariffs, consistent with sectoral benchmarks and regulatory norms, despite KE's actual ratio differing. The authority has allowed KE to recover the cost of foreign debt based on 3-month LIBOR or SOFR plus a 4.5% spread, including applicable hedging costs, and to claim exchange rate variations on both interest and principal for unhedged loans. KE's actual recovery performance will be closely monitored throughout the control period to ensure service integrity. The regulator allowed a 12% RoE for its transmission segment, recognizing the utility's investment requirements and risk exposure. Stakeholders echoed concerns, particularly around the inclusion of taxes as pass-through items and system inefficiencies. KE's request to actualize the cost of debt, including hedging premiums, was accepted in principle by NEPRA, with actual costs to be verified at the time of adjustment.
Express Tribune
17-04-2025
- Business
- Express Tribune
NEPRA questions audit independence
Prior approval to NEPRA K-electric consumer may seen a huge relief over electricity bills. PHOTO: FILE Listen to article 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.
Express Tribune
17-04-2025
- Business
- Express Tribune
Karachiites may get Rs6.62/unit extra relief
Prior approval to NEPRA K-electric consumer may seen a huge relief over electricity bills. PHOTO: FILE Listen to article Karachi power consumers may receive an additional relief of Rs6.62 per unit in their electricity bills, over and above the government's announced tariff cut. The indication came on Wednesday as NEPRA concluded proceedings on a petition seeking a tariff reduction under the February 2025 fuel cost adjustment. If approved, the petition will allow K-Electric (KE) consumers to benefit from a total reduction of approximately Rs6.662 billion. KE reiterated its stance on partial adjustment, citing accumulated costs – a position that met with opposition from industrial stakeholders. KE's argument for partial adjustment rests on the principle of creating a financial cushion for consumers during the peak summer months, when both consumption and billing typically increase. Responding to a query about the petitioner bearing the cost of independent verification, KE's chief executive officer, Moonis Alvi, said that such a requirement aligns with global practices. He explained that applicants are routinely responsible for costs related to feasibility studies and risk assessments, including environmental evaluations during loan applications for new projects. On the issue of capacity payments in the generation tariff, NEPRA officials clarified that such payments are calculated based on availability and have always been part of the tariff structure. Previously, consumers only saw a one-rate tariff; under new regulations, the tariff is broken down into components for greater transparency. Tanveer Barry, Vice President of the Karachi Chamber of Commerce and Industry (KCCI), stressed the importance of timely data sharing by NEPRA to allow stakeholders to raise concerns without delay. NEPRA officials, however, stated that there were no delays on their end in fulfilling Service Level Agreements (SLAs), providing a detailed timeline to support this claim. Clarifying whether the proposed relief was part of the government's broader tariff cut, NEPRA said it was an additional benefit being extended by KE to its consumers. The authority has reserved its decision, which will be announced after reviewing the data and arguments presented by KE during the hearing. Stakeholders decry 'burden of rupee depreciation' During the hearing, industrial stakeholders also urged NEPRA to expedite approval of the multi-year tariff to provide stability for industrial planning and forecasting. Rehan Javed, an industrial representative, said that building production plans around provisional numbers hinders productivity and growth, ultimately affecting the country's economic trajectory. Industrial stakeholders criticised the government for negotiating an agreement with bagasse-based Independent Power Producers (IPPs) that would shift the burden of rupee depreciation onto consumers. During the public hearing, it was disclosed that consumers would shoulder 70% of the actual rupee depreciation when it comes to payments made to these IPPs. According to the amendment, "foreign O&M: PKR/USD depreciation shall be allowed only to the extent of 70% of the actual depreciation per annum. In case the PKR appreciates against the USD in a year, then 100% of such appreciation shall be passed on to the consumers." Participants noted the historical trend of rupee depreciation and argued it was unfair to place 70% of that burden on consumers. They contended that the sugar industry was already generating substantial profits, and bagasse-based IPPs were yielding additional profits. A representative from the power ministry responded by noting that consumers had previously been paying 100% of the depreciation cost, and the revised structure actually offers partial relief. Regarding a separate agreement with nine IPPs, it was revealed that consumers would benefit from a relief of Rs1 per unit. The Power Division, in its petition, sought to revise the fuel cost component of the tariff effective October 1, 2021. It proposed Rs4,500/ton as of October 1, 2021, with a 5% annual indexation. The FCC would be calculated at a calorific value of 7,000 BTU/kg. The working capital component would be reduced by 50% for all bagasse IPPs, except for Shahtaj, whose tariff does not include the WCC component. The petition further proposed a fixed return on equity (ROE) and return on equity during construction (ROEDC) at Rs168/USD, with no future USD indexation. The indexation of local O&M would be allowed at the lower of either 5% per annum or the actual average national consumer price index (NCPI) for the preceding 12 months for all bagasse IPPs. Moreover, IPPs may be allowed to sell electricity to bulk power consumers (BPCs) subject to amendments in their generation licence (GL) and energy purchase agreement (EPA), provided they commit to paying compensation to the central power purchasing agency (CPPA-G) for each unit supplied. The cap for insurance during operation would be 0.7% of the EPC cost for Chiniot Power Ltd., aligning with other bagasse-based IPPs. The reference O&M component for Chiniot Power Ltd. would also be reduced by 10%, bringing it in line with other similar IPPs. The petition also called for a revision in the sharing mechanism beyond the net annual plant factor for all bagasse-based IPPs, excluding Shahtaj.
Express Tribune
16-04-2025
- Business
- Express Tribune
Karachi power consumers may get relief as K-E seeks Rs6.62 per unit tariff cut
Prior approval to NEPRA K-electric consumer may seen a huge relief over electricity bills. PHOTO: FILE Listen to article A significant reduction in electricity tariffs for Karachi consumers may soon be on the horizon, as a public hearing at NEPRA Headquarters concluded on the matter. K-Electric submitted a request for a Rs6.62 per unit reduction in electricity rates under the Fuel Charges Adjustment (FCA) mechanism. The proposal also included approval of fuel cost charges incurred from July 2023 to February 2025, Express News reported. K-Electric officials argued that a fuel cost adjustment amounting to Rs13.9 billion is still pending. NEPRA Member Rafiq Ahmed Sheikh pointed out that since November, negative fuel charge adjustments have been observed, indicating that consumers were supposed to receive relief. However, he noted that K-Electric brought forward older adjustments during this period of expected relief. A consumer representative expressed concern that the full benefit of the negative FCA has once again not been passed on to the consumers. Sheikh further remarked that if K-Electric fails to replace malfunctioning meters, the company itself will bear the losses. If the proposal is approved in full, it would result in a substantial relief of Rs6.6 billion for consumers. The reduction, however, will not apply to lifeline consumers, protected consumers, pre-paid meter users, and electric vehicle charging stations.
