Latest news with #MYT
Business Recorder
33 minutes ago
- Business
- Business Recorder
Nepra's KE MYT decision: PD submits review motion
ISLAMABAD: The Power Division on Monday submitted the much-talked about review motion challenging the National Electric Power Regulatory Authority's recent Multi-Year Tariff (MYT) determinations for K-Electric (KE) for 2024-25 to 2029-30. The government is urging Nepra to revise key assumptions, performance benchmarks and profit margins in line with real-world data and standards applied to other power utilities. According to Power Division, Nepra allowed KE several cost items and profit margins that are more generous than those granted to other utilities across the country. As a result, electricity bills for Karachi consumers are set to rise disproportionately, and public finances will bear an unnecessary burden. Total financial impact is in excess of Rs 300 billion of the intervention identified for review by GoP in KE MYT. Power Minister, Sardar Awais Khan Leghari, in his tweet said that the power sector of Pakistan cannot afford any inefficiencies encouraged through tariff structure of any company, irrespective of whether it is private or public. 'Our review supports a sustainable and healthy environment in the distribution system of Pakistan in a responsible manner. Power Division hopes that the review process is carried out in a transparent and fair manner,' he added. The key concerns in the Review Petition are as follows: Supply (fuel and fuel related costs): Nepra set KE's fuel-cost rate at Rs. 15.99/kWh, whereas other utilities buy power at lower rates from the national grid. This gap shifts about Rs. 28 billion (FY 2024) and Rs. 13 billion (FY 2025) of extra costs onto the federal budget rather than onto KE customers. Recovery Loss Allowance: KE was permitted to include 'recovery losses' in its tariff even though its own records show it recovers more than the level Nepra allowed. No other utility received this special allowance. This adds roughly Rs. 36 billion in FY 2024 and Rs. 35 billion in FY 2025 to KE's revenue that consumers end up paying. Cumulative impact over a 7-year period is more than Rs 200 billion. Working Capital Allowance: NEPRA permitted KE a 24 percent markup on working capital, a much higher percentage than in its previous tariff and higher than any other power distributor. This increased KE's allowable revenue by about Rs. 2.4 billion in FY 2024 and is projected to total around Rs. 15 billion over the control period of 7 years Higher Allowed Distribution Loss: Nepra set KE's allowed loss at 13.90 percent, instead of the 13.46 percent KE had planned. Losses are electricity that is generated but not billed, due to leaks or theft, or kunda. Around 7 percent of all such leakages can be attributed to theft. By permitting a higher loss level, KE passes on an extra Rs. 3.1 billion in FY 2024, rising to about Rs. 21 billion over the control period. 'Law & Order' Margin: KE received a special 2 percent margin to offset security costs in Karachi—a perk not granted to any other utility, even those operating in equally or more volatile regions. Moreover, Law & Order in Karachi has improved considerably over the last few years, and thereby there exists no reason for such a margin. This margin adds approximately Rs. 14 billion in FY 2024 and up to Rs. 99 billion over the multi-year period to KE's revenue requirement. Retention of 'Other Income': KE is allowed to keep money from fines imposed on its contractors, interest on bank deposits, and profits from side businesses. In effect, consumers have already paid for the assets that generate these incomes, so these funds should reduce KE's costs to customers, not pad its revenue. Effectively, it is being proposed that any such gain on assets that has been financed by consumers needs to be shared with consumers. Transmission (Moving Power from Grid to KE): High transmission loss Target & skewed sharing; NEPRA allowed KE a 1.30 percent loss target, even though KE's historical losses are closer to 0.75 percent. KE keeps 75 percent of any savings if it performs better than 1.30 percent, passing only 25 percent of savings to consumers. This encourages inefficiency and keeps bills high. Financial impact is about Rs. 4 billion in FY 2024, rising to roughly Rs. 28 billion over the control period. Excessive Return on Equity (RoE): KE was granted a 12 percent RoE in U.S. dollars (about 24.46 percent in rupee terms). Other national utilities (like NTDC) receive only 15 percent RoE in rupees. This difference costs consumers around Rs. 4 billion in FY 2024 and approximately Rs. 37 billion over the control period. Distribution (delivering power to homes & businesses)- High distribution - RoE disparity: KE's distribution arm was allowed 14 percent RoE in U.S. dollars (about 29.68 percent in rupees). By comparison, other Discos like FESCO get only about 14.47 percent RoE in rupees. This adds roughly Rs. 3.7 billion in FY 2024 and Rs. 35.6 billion over the control period to KE's revenue. Distribution Loss & Special Allowance: KE was granted an extra 2 percent 'law & order' margin on top of its allowed losses, even though Karachi's security situation is similar to or better than other regions. KE also keeps 25 percent of any savings if it performs better. These practices cost consumers about Rs. 14 billion in FY 2024 and up to Rs. 99 billion over the multi-year period. Working Capital Markup: A 23.91 percent markup was approved for KE's distribution working capital—far higher than any other utility. This adds about Rs. 0.8 billion in FY 2024 and roughly Rs. 10 billion over the control period to KE's revenue requirement. Generation (KE's Own Power Plants), Payments to Idle Power Plants (Take-or-Pay): Nepra approved capacity payments to several KE power plants (BQPS-I, KCCP, KGTPS, SGTPS) even though these plants will run at minimal or no output because KE sources cheaper power from the national grid. Consumers and the government pay for capacity that is not used. This costs about Rs. 12.7 billion in FY 2025 and roughly Rs. 82.5 billion over the multi-year period. Favorable indexation &RoE for KE's plants: Under a hybrid 'take-or-pay' model, KE's plants keep full inflation adjustments (indexed to U.S. CPI or USD/PKR), while independent power producers (IPPs) do not receive equally generous terms. RoE for KE's plants was set at 17 percent (using PKR 168/USD), higher than typical IPP terms, costing Rs. 7 billion in FY 2024 and about Rs. 57.3 billion over the control period. This will result in overall higher bills for Karachi customers; KE's allowed costs, profit margins, and extra allowances will cause Karachi consumers' electricity bills to rise significantly compared to other regions. Several KE cost items—especially the inflated fuel benchmark and payments to idle plants—are effectively covered by the government, stretching public finances. The determinations are unfair treatment & efficiency discouraged: Granting KE advantages not given to other utilities creates a 'two-tier' system. This discourages KE from boosting efficiency, and it undermines transparent, consistent tariff-setting nationwide. The Government maintains that all utilities should be treated equally. KE should not receive special cost or profit allowances unavailable to other power companies and tariffs must reflect actual costs and reasonable returns. Extra allowances for inefficiency and high profit rates must be removed to keep bills affordable. For regulatory accountability Nepra should revise assumptions, benchmarks, and profit margins so they align with real performance data and the standards used for other utilities. Copyright Business Recorder, 2025
Business Recorder
an hour ago
- Business
- Business Recorder
KE highlights future outlook
KARACHI: K-Electric (KE), Pakistan's only vertically integrated power utility, held its Corporate Briefing Session at the Pakistan Stock Exchange (PSX) on Monday, reaffirming its commitment to reliable, affordable, and sustainable power supply to Karachi and its adjoining areas. The session provided stakeholders, analysts, investors and members of the media with a comprehensive update on KE's operational progress, recently announced tariff decisions by the regulator, and strategic direction. During the briefing, KE presented its recently approved Multi-Year Tariff (MYT) for FY24–FY30, which enables its proposed execution of the USD 2 billion investment plan to modernise and expand Karachi's power infrastructure. The utility also discussed its progress in renewable energy development, having successfully completed competitive bidding for 640 MW of renewable projects. These include landmark bids such as the 220 MW hybrid solar-wind project at Dhabeji, awarded at a record-low tariff of PKR 8.92/kWh, which stands approved along with the 150 MW Winder-Bela solar Projects. In line with its ambition to diversify the energy mix and reduce reliance on expensive fuels, KE aims to integrate 30% renewable energy share into its generation mix by 2030. 'NEPRA's approval of our MYT enables us to unlock critical investments in infrastructure for safe and reliable supply of power. The approved tariff will allow us to build on our commitment to operational efficiency, sustainability, and community outreach,' said Muhammad Aamir Ghaziani, Chief Financial Officer at K-Electric. 'With a lot of misgivings around the approved tariff, I want to stress that this approval will not impact consumer-end tariff which is governed under the Government of Pakistan's uniform tariff policy.' Since privatization in 2005, KE has invested over USD 4.6 billion in its infrastructure – reinvesting all profits. These investments have led to major improvements across the power value chain, including a 104% increase in transmission capacity, a 2.3x growth in distribution capacity, 18.2 percentage points reduction in T&D losses, and a 16 percentage point improvement in generation efficiency. KE's grid infrastructure has expanded from 52 to 74 grid stations, and load-shed exempt network has increased from 6.6% in 2005 to 70% today. Most notably, KE's AT&C losses have dropped from 43% in 2009 to 23.1% in 2024. Copyright Business Recorder, 2025
Business Recorder
a day 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
2 days ago
- Business
- Business Recorder
K-Electric urges govt to take control of 300 loss-making feeders
KARACHI: K-Electric wants the government to take control of 300 loss-making feeders, out of a total of 2,129, to make the city load-shedding-free, following criticism from government quarters, including the National Assembly's Standing Committee. Monis Alvi, Chief Executive Officer (CEO) of K-Electric, during a session with a group of journalists on Saturday, urged the government to establish a recovery mechanism for revenue -deficient distribution feeders, assuring that K-Electric would support the government's initiative to eliminate power outages in the metropolitan city. Alvi said that the company is willing to supply electricity to these loss-making feeders, provided the government takes responsibility for recovery operations. The CEO faced criticism from the National Assembly's Standing Committee on Power as well as the Sindh Assembly amid rising temperatures exceeding 41°C. The power utility has reportedly increased load-shedding in areas where transmission and distribution losses have reached 70 percent or higher. 'If the government takes control of these loss making 300 feeders, we would be very close to making Karachi load-shedding free,' Alvi said confidently. He explained that these 300 feeders account for 87 percent of the total losses incurred by the company, mentioning that 70 percent of the city is already exempt from power cuts. Regarding the new Multi-Year Tariff (MYT) for the supply segment from FY2024 to FY2030, Alvi said these determinations will not affect the electricity rates charged to customers, as these continue to be governed under the uniform tariff policy applicable across Pakistan. This decision marks a significant milestone for KE towards realizing its comprehensive investment plan 2030 that entails the company's efforts to further reduce losses in transmission and distribution network, drive growth in its customer base, and bolster power utility's infrastructure to meet current demands and future needs. He said that with the implementation of the renewed MYT, Karachi could become up to 90 percent load-shedding free by 2030. He noted that increased economic activity has led to a rise in electricity demand in Karachi and confirmed that K-Electric currently has the capacity to supply 4,500 megawatts of electricity to the city. By 2030, the number of electricity consumers in the city is expected to reach 5 million. The CEO expressed confidence that the utility would expand its transmission capacity to 5,000 megawatts. 'K-Electric currently has the capacity to supply 4,500 megawatts.' Alvi also mentioned that K-Electric is prepared to connect captive power industries to the grid and provide them with electricity. He added that the utility is willing to adhere to the agreed timeline for transitioning captive power users to the grid, in coordination with the government and relevant stakeholders. Copyright Business Recorder, 2025
Express Tribune
3 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.
