Latest news with #KE
Business Recorder
6 hours ago
- Business
- Business Recorder
Nepra's MYT decision: a step in the right direction
EDITORIAL: After a prolonged delay, the regulator — National Electric Power Regulatory Authority (Nepra) — has finally approved the Multi-Year Tariff (MYT) for the only private entity operating in the power utility sector. There has been a considerable outcry in the media following the Power Minister's criticism of Nepra's decision to allow KE (Karachi Electric) to incorporate recovery losses. But before delving into the controversy, it must be emphasised that this is a step in the right direction, as it will unlock KE's valuation for its shareholders. It will help resolve disputes among existing shareholders and incentivize much-needed investment in the fully integrated energy-utility company. This, in turn, will bode well for the sustainability of the power supply to Karachi, the country's economic hub and a city of teeming millions. Moreover, the move sets the stage for the privatisation of other distribution companies (Discos) — a long-awaited reform in the power sector's transmission and distribution segments. Until now, reform efforts have largely focused on the generation side. Unfortunately, the debate primarily concerns KE receiving compensation for recovery losses. On paper, KE's recovery losses appear higher than those of a few other Discos. Ironically, in the so-called 'better-performing' Discos, recovery during 8MFY25 exceeds 100 percent for consumers using 0–200 units but drops to the 80s for higher-slab consumers. The pattern for KE is similar. However, its overall recovery rates are lower — mid-80s for the 0 — 200-unit slab and mid-70s for higher slabs. These figures point to overbilling by other Discos and lower collection efficiency by KE. Nepra has allowed KE to pass on these costs to different consumers. However, shifting the burden to others is unfair to honest consumers. Yet, other Discos have been doing the same — without any transparency. The PHL surcharge (Rs3.23/unit), paid by all electricity consumers nationwide, including KE's, represents a legacy cost linked to historical losses by state-owned Discos. These public entities are not held financially accountable for their losses; the costs are absorbed into the infamous circular debt. In contrast, KE's shareholders bear the losses and are justified in seeking cost coverage. The way forward should focus on reducing KE's losses and ending overbilling by others. Media scrutiny should push KE to improve its recovery rates. Nonetheless, KE's AT&C (Aggregate Technical and Commercial) losses, as allowed by Nepra, have declined from 43.2 percent in 2009 to 20.3 percent today, with a target of 15.3 percent by 2030. The power division's criticism is a grievance against KE's current management. Nepra's determination came after consultations with all stakeholders, including the power division. If there were objections, they should have been raised during that process. It is important to note that Karachi is a complex city, and the private operator has halved its losses over the past 15 years. Had other Discos achieved similar results, the savings would have been substantial. Nepra's allowance for losses is set to decline over the next seven years — and the same standard should be applied to other Discos as well. Achieving this, however, requires investment and competent management. Such outcomes are unlikely without corporatisation and privatisation. To move forward, Discos must be held accountable for their losses and rewarded for improved performance. They need their MYTs and access to private investment — both of which would benefit Pakistan's broader, evolving power sector. KE's MYT approval is a step in this direction. Copyright Business Recorder, 2025
Business Recorder
6 hours ago
- Business
- Business Recorder
Tariff comfort, consumer cost, Nepra's gamble
In a move that will raise eyebrows among those advocating for performance-based regulation, Nepra has sided with K-Electric in allowing a recovery shortfall allowance based on a 92 percent recovery ratio — a decision that flies in the face of the Ministry of Energy's more disciplined proposal. KE had argued that, unlike state-owned discos whose losses are quietly absorbed into the circular debt, its commercial shortfall should be treated as a legitimate pass-through cost. But instead of asking why a privatized utility with over 100 years of history and significant capital investment still needs regulatory shelter for basic operational efficiency, the regulator has chosen to codify KE's weakest performance year (FY24: 92.8 percent) into its future tariff framework. Worse still, the benchmark recovery percentage even by the end of the MYT in FY30 period does not reach the levels seen in FY22. The Ministry's stance — rooted in logic, precedent, and consumer interest — was brushed aside. The MoE had argued for using a 'high watermark' recovery ratio from FY22 or FY23 (96.6 percent and 96.7 percent, respectively) to prevent one off-year from becoming the baseline for tariff calculations. That approach would have halved the burden on consumers, reducing KE's claimed recovery loss allowance from Rs2.88/kWh to Rs1.41/kWh. Instead, with Nepra's green light, KE has now locked in a structural inefficiency at a time when the rest of the sector is — at least on paper — moving toward performance benchmarking and fiscal discipline. Nepra's ruling signals a worrying precedent: if a private utility can socialize its commercial inefficiencies while retaining operational autonomy, then the case for privatization or performance-linked regulation becomes weaker. What message does it send when a regulator backs comfort over competition? If the regulator's decision to validate KE's recovery allowance set a risky precedent, its approval of actualization of units sent-out could also be problematic. In theory, adjusting tariff revenue to reflect real demand variations — much like what is allowed for discos — sounds reasonable. But in practice, it opens up a perverse incentive: KE's revenue is now insulated from shortfalls in demand, even if those shortfalls are partially self-inflicted. Given the regulator's own acknowledgment that this framework could encourage increased load shedding in high-loss areas, the decision feels like an open invitation for KE to game the system — maximizing revenue protection while shifting risk onto the consumer. The regulator has held on to usual warnings: KE is 'directed to ensure uninterrupted supply' and its performance will be monitored on benchmarks like SAIFI, SAIDI, and load-shed adherence. But let's be honest — the track record doesn't inspire confidence. KE has flouted load-shedding rules in the past, often citing commercial losses, and faced penalties so negligible they barely qualify as deterrents. If the regulator is serious about disincentivizing this behaviour, it needs to do more than issue legalese-laden warnings. It must link revenue protections directly with performance metrics, impose penalties that bite. Otherwise, what Nepra has created is a regulatory shelter — one that could make blackouts not just a coping mechanism, but a profit-maximizing strategy. This also comes at a time when KE's future demand growth is under serious question. With overall electricity consumption falling by 7.2 percent in FY23 — and 7.9 percent in residential and 1.5 percent in industrial segments — and with net metering and competitive CTBCM dynamics gaining traction, KE's captive market is eroding. The Ministry of Energy had flagged this, rightly recommending a downward revision in demand projections and capital spending. But KE continues to push ahead with an ambitious investment plan, and now has the regulatory cushioning to shift the consequences of demand shortfalls onto consumers. In such an environment, the risk isn't just of rising tariffs — it's of deepening the disconnect between consumer experience and utility accountability. Nepra's accommodation — from recovery shortfall allowances to actualization of sent-out units — may seem like one-off technical approvals, but they carry deeper structural implications as Pakistan inches toward privatizing other discos under the IMF's watch. By allowing revenue protection mechanisms that decouple financial performance from operational efficiency, Nepra risks embedding regulatory moral hazard into the very model it aims to scale. If a legacy private utility is allowed to socialize commercial inefficiencies and manage demand risk without tight performance-linked conditions, what incentive remains for future investors to run leaner, consumer-centric utilities? Worse, it sets a precedent where privatization becomes a risk-free return model underwritten by public consumers, undermining the very fiscal discipline that the IMF reforms seek to instill.
Express Tribune
2 days ago
- Business
- Express Tribune
K-Electric proposes formula for loadshedding-free Karachi
Listen to article K-Electric has proposed a formula to eliminate electricity load-shedding in the metropolitan city. Three hundred out of 2,129 feeders in the metropolis account for 87% of power losses, which is the main reason for blackouts, KE's CEO Moonis Alvi said while speaking to a delegation of the Council of Economic and Energy Journalists (CEJ) on Saturday. 'If the government takes over these 300 feeders and manages the internal electricity distribution in these areas, K-Electric will be much closer to making Karachi load-shedding-free,' Alvi said, adding that KE is ready to supply electricity to these 300 feeders, but the responsibility for bill recovery from these areas would rest with the government. CEO Alvi claimed that 70% of Karachi is already exempt from load-shedding. K-Electric is working on introducing new technology to prevent power pilferage from feeders. He warned that any tampering with PMTs (Pole-Mounted Transformers) could lead to technical faults that may take up to three days to fix. He reiterated the offer to the government to help manage the internal electricity system in these areas. The KE CEO further stated that K-Electric's Multi-Year Tariff (MYT) will not adversely affect ordinary consumers. Rather, it will encourage foreign investment in the city's power supply system. 'The National Electric Power Regulatory Authority will review the MYT each year based on the level of investment,' he added. Alvi said that implementation of the MYT could make Karachi up to 90% load-shedding-free by 2030. By then, the number of power consumers in the metropolis is expected to reach five million, and power transmission will increase to 5,000MW. Responding to a question, Alvi said that KE is ready to supply electricity to captive power industries by connecting them to the grid. "We are prepared to follow the agreed timeline with the government and stakeholders for this transition." Industrial activity in Karachi has increased over the past few months, leading to a rise in electricity demand, he added.
Express Tribune
2 days ago
- Business
- Express Tribune
KCCI urges PM to release Rs23b power subsidy
Listen to article President of the Karachi Chamber of Commerce & Industry (KCCI), Muhammad Jawed Bilwani, has urged Prime Minister Shehbaz Sharif to ensure the release of the long-overdue Rs23 billion relief in electricity bills on incremental consumption. In a statement released on Friday, he called for the inclusion of this relief in the upcoming federal budget for FY2025-26, lamenting that although it was allocated in earlier budgets, it has yet to be disbursed — affecting only Karachi's industrial sector, while the rest of the country has received the benefit. As per the statement, Bilwani wrote a letter to the prime minister, acknowledging the government's steps to support the business community but expressed deep concern over the continued delay in providing the subsidy for the period from July 1, 2021, to October 21, 2023. He noted that Karachi's industries remain under immense financial pressure due to administrative and legal complications. He stated that the total subsidy for the period stands at Rs33 billion, of which Rs23 billion is undisputed and should have already been disbursed. Funds were earmarked in previous budgets — Rs22 billion in FY2021-22, Rs13 billion in FY2022-23, and Rs7 billion in FY2023-24 — but the subsidy has not reached recipients due to procedural delays involving K-Electric. "K-Electric (KE) operated without a stay order for nearly nine months yet failed to pass on the subsidy to consumers," said Bilwani, adding that NEPRA did not enforce compliance, and legal obstacles have dragged the issue. He pointed out that KE's appeals were dismissed by a tribunal in July 2024, but the matter remains stalled due to a stay order from the Islamabad High Court. KCCI has urged immediate verification of the figures by the Power Division and NEPRA, stressing that the verified subsidy should be reflected in the upcoming budget. Crucially, KCCI proposed that the undisputed Rs23 billion be paid directly to industrial consumers instead of routing it through KE to avoid further delays. "This is not just a legal obligation; it is a matter of economic justice and national interest," Bilwani said.
Business Recorder
3 days ago
- Business
- Business Recorder
JI accuses Nepra of displaying anti-Karachi bias
KARACHI: Jamaat-e-Islami (JI) Karachi chief Monem Zafar Khan has accused the National Electric Power Regulatory Authority (Nepra) of discriminatory practices against Karachiites, criticizing the decision to burden consumers with recovery losses and imposing a higher basic tariff of Rs40 per unit in the metropolis as compared to Rs35 in other cities. In a letter to NEPRA's chairman, he condemned the authority for failing to uphold its constitutional duties, alleging clear bias against Karachi's residents. He argued that while other cities' electric supply companies are barred from passing recovery losses onto consumers, Karachi Electric (KE) has been allowed to do so, placing an unfair financial strain on the city's residents. 'Such biased decisions undermine NEPRA's claims of equality and lay the foundation for injustice,' he stated. Highlighting NEPRA's approval of a multi-year tariff, the JI leader noted that KE is set to collect an additional Rs97 billion from consumers until 2030. He also raised concerns over NEPRA's ongoing hearings regarding KE's Rs76 billion write-off claims, alleging the authority may once again favour the controversial private utility. Monem criticized KE's dismal performance, pointing out that it provides the most expensive electricity in the country while failing to address inefficiencies and alleged misdeeds. He demanded that Nepra take strict notice of KE's poor service, frequent load-shedding and questionable transactions. Additionally, he called for the revocation of KE's operating license and a forensic audit of the company's accounts to ensure transparency. The JI Karachi Chief urged the Nepra to reconsider its policies and prioritize the interests of Karachi's consumers, warning that continued discrimination would deepen public resentment. Copyright Business Recorder, 2025
