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Business Recorder
3 days ago
- Business
- Business Recorder
Nepra's decisions on KE tariffs: Power Div. flags potential consumers harm, urges revision
ISLAMABAD: The Power Division on Wednesday announced plans to file reviews of the National Electric Power Regulatory Authority's recent decisions regarding K-Electric tariffs, warning that parts of the rulings could have negative consequences for consumers if not revised. Power Minister Sardar Awais Khan Leghari took to X (formerly Twitter) to express concerns about Nepra's decisions announced during the last few days that have drawn strong reactions from the ministry. The minister's remarks came at a time when Nepra, which by law is the power sector regulator, feels helpless in implementing its directions issued to Power Division and its affiliated organizations. NEPRA approves K-Electric's MYT for supply segment Last month, during a public hearing on IEECO's Multi-Year Tariff petition , Member (Tech) Rafique Ahmad Shaikh, asked Power Division to get rid of Chief Executive Officer (CEO), for poor performance. Similar positions were seen in other Discos and NTDC, which irritated the Authority during public hearings. 'The Ministry has serious concerns regarding Nepra's multiple determinations related to K-Electric's licenses for generation, transmission, distribution, and supply. These decisions also impact the investment plan for the upcoming multi-year tariff period,' said the Power Minister. Leghari emphasized that the rulings have significant long-term implications for consumer tariffs and the Federal Government's subsidy framework under the uniform tariff regime. 'The ministry is preparing to seek a review of the recent determinations concerning transmission, distribution, and supply. Additionally, the reconsideration of an earlier generation tariff decision — submitted back in December 2024—still awaits Nepra's attention. This delay poses serious financial risks for the power sector and its associated subsidies,' he added. The minister further cautioned that unresolved issues within Nepra's rulings could negatively affect consumers and the broader regulatory environment, potentially deterring private sector investment in the distribution sector. According to a power sector expert, Nepra's annual recovery loss allowance of Rs 40 billion granted to K-Electric—totaling over Rs 320 billion across seven years. Another insider sarcastically stated that 'Minister seems super happy on Nepra's determinations'. Another expert stated that real challenge is rampant power theft and non-recovery of electricity bills in the country. On the governance side, however, the proposed bill to classify electricity theft as a criminal offense was recently rejected by lawmakers. As a result, Discos are left with no option but to recover their legitimate business costs from paying consumers — a practice observed across the country. Power Division wants to review Nepra's recent tariff determinations for K-Electric, consumers across Pakistan, including those in Karachi, already burdened with the PHL surcharge due to the continued non-recovery of dues from other government-owned Discos. The Nepra's determinations on KE Multi-Year Tariff petitions are actually removing such disparities currently present in Pakistan's power sector. Also, unlike KE previous multiyear tariff for 2017-23, there is a periodic review mechanism built in the tariff for the period 2023-30. Copyright Business Recorder, 2025
Business Recorder
3 days ago
- Business
- Business Recorder
Nepra's decisions on KE tariffs: PD flags potential consumers harm, urges revision
ISLAMABAD: The Power Division on Wednesday announced plans to file reviews of the National Electric Power Regulatory Authority's recent decisions regarding K-Electric tariffs, warning that parts of the rulings could have negative consequences for consumers if not revised. Power Minister Sardar Awais Khan Leghari took to X (formerly Twitter) to express concerns about Nepra's decisions announced during the last few days that have drawn strong reactions from the ministry. The minister's remarks came at a time when Nepra, which by law is the power sector regulator, feels helpless in implementing its directions issued to Power Division and its affiliated organizations. NEPRA approves K-Electric's MYT for supply segment Last month, during a public hearing on IEECO's Multi-Year Tariff petition , Member (Tech) Rafique Ahmad Shaikh, asked Power Division to get rid of Chief Executive Officer (CEO), for poor performance. Similar positions were seen in other Discos and NTDC, which irritated the Authority during public hearings. 'The Ministry has serious concerns regarding Nepra's multiple determinations related to K-Electric's licenses for generation, transmission, distribution, and supply. These decisions also impact the investment plan for the upcoming multi-year tariff period,' said the Power Minister. Leghari emphasized that the rulings have significant long-term implications for consumer tariffs and the Federal Government's subsidy framework under the uniform tariff regime. 'The ministry is preparing to seek a review of the recent determinations concerning transmission, distribution, and supply. Additionally, the reconsideration of an earlier generation tariff decision — submitted back in December 2024—still awaits Nepra's attention. This delay poses serious financial risks for the power sector and its associated subsidies,' he added. The minister further cautioned that unresolved issues within Nepra's rulings could negatively affect consumers and the broader regulatory environment, potentially deterring private sector investment in the distribution sector. According to a power sector expert, Nepra's annual recovery loss allowance of Rs 40 billion granted to K-Electric—totaling over Rs 320 billion across seven years. Another insider sarcastically stated that 'Minister seems super happy on Nepra's determinations'. Another expert stated that real challenge is rampant power theft and non-recovery of electricity bills in the country. On the governance side, however, the proposed bill to classify electricity theft as a criminal offense was recently rejected by lawmakers. As a result, Discos are left with no option but to recover their legitimate business costs from paying consumers — a practice observed across the country. Power Division wants to review Nepra's recent tariff determinations for K-Electric, consumers across Pakistan, including those in Karachi, already burdened with the PHL surcharge due to the continued non-recovery of dues from other government-owned Discos. The Nepra's determinations on KE Multi-Year Tariff petitions are actually removing such disparities currently present in Pakistan's power sector. Also, unlike KE previous multiyear tariff for 2017-23, there is a periodic review mechanism built in the tariff for the period 2023-30. Copyright Business Recorder, 2025
Express Tribune
16-05-2025
- Business
- Express Tribune
NEPRA flags power woes for industry
Listen to article The National Electric Power Regulatory Authority (Nepra) has directed the Power Division to address the concerns of the industrial sector regarding inconsistent power supply. Industries are reportedly considering a return to captive power plants (CPPs) despite their higher operational costs due to frequent grid supply disruptions. The directive was issued during a public hearing on a petition filed by the Central Power Purchasing Agency-Guarantee (CPPA-G) concerning the assumptions used to project the power purchase price (PPP) for financial year 2025-26. The hearing was chaired by Nepra Chairman Waseem Mukhtar and attended by Member (Technical) Sindh Rafique Ahmad Shaikh, Member (Technical) K-P Maqsood Anwar Khan and Member (Law) Amina Ahmed. CPPA-G presented seven scenarios for the proposed PPP. In scenario one, it projected the price at Rs24.75 per unit, scenario two – Rs26.04 per unit, scenario three – Rs25.88 per unit, scenario four – Rs26.33 per unit, scenario five – Rs26.70 per unit, scenario six – Rs26.55 per unit and scenario seven – Rs26.22 per unit. Replying to a question, CPPA-G representative Naveed Qaiser said that scenarios four and five were likely to be implemented next year. However, those projections were challenged by several interveners, who argued that the estimates did not adequately reflect the expected decline in hydropower generation. They also criticised the assumed exchange rate of Rs290/$, which was likely to influence future electricity pricing. During the hearing, it was revealed that the PPP could drop by 78 paisa to Rs2.25 per unit, potentially saving consumers Rs140 billion to Rs400 billion in the next fiscal year. The average purchase price is expected to range between Rs24.75 and Rs26.22 per unit compared to the current average of Rs27 per unit. Authorities projected a possible Rs2-per-unit reduction in tariffs alongside a 2.8% to 5% increase in demand, assuming an exchange rate of Rs300/$ in FY 2025-26. The case officer explained that due to varying demand and fuel price assumptions, average per-unit prices in different scenarios could range between Rs6.8 and Rs8.1. Total fuel costs might reach Rs1.28 trillion, influenced by exchange rate fluctuations, inflation and interest rates. Some scenarios also predict a 24% reduction in electricity prices compared to the current year. Transmission losses for National Transmission and Despatch Company (NTDC) are expected to remain stable at 2.80%. Nepra questioned the Ministry of Energy's optimistic demand projections, especially given the recent downward trends. In response, ministry officials argued that demand was expected to rebound in line with the projected GDP growth. They noted that electricity demand rose 28% in April, attributing the uptick to recent tariff reductions that encouraged industries to reconnect to the grid. The projections of CPPA-G were challenged by the interveners, who stated that PPP projections for FY26 were not correct, as a reduction in hydel generation was imminent. The budget for FY26 is projected to be prepared at an exchange rate of Rs290 per dollar. During the hearing, it was revealed that the PPP was estimated to decrease by 78 paisa to Rs2.25 per unit, which could provide relief worth Rs140 billion to Rs400 billion to electricity consumers in the next fiscal year. According to officials, the estimated PPP for the upcoming fiscal year will range between Rs24.75 and Rs26.22 per unit, compared to Rs27 per unit for the current fiscal year. Authorities also estimated a Rs2-per-unit reduction in electricity prices and a 2.8% to 5% increase in demand. The US dollar is projected to be valued at Rs300 in the next fiscal year. The case officer informed Nepra that the request pertained to PPP projections for the coming fiscal year. Different scenarios suggest a significant variation in electricity prices, with the average per-unit price likely to remain between Rs6.8 and Rs8.1. Due to potential increases in fuel costs, the total fuel cost could rise to Rs1,284.11 billion. Factors such as the dollar rate, inflation and interest rates impact electricity prices, which is why prices are expected to be higher in scenarios with low demand and high fuel costs. The briefing revealed that compared to the current fiscal year, some scenarios could result in a 24% decrease in electricity prices, while transmission losses for NTDC are expected to remain at 2.80%. Nepra questioned the Ministry of Energy's claims regarding increased electricity demand. The authority's chairman asked how an increase was expected when demand had been declining in recent years. The Ministry of Energy responded that demand was expected to rise based on GDP growth and recent reductions in electricity prices had already led to an increase in demand. In April, electricity demand increased by 28% and industries have started returning to the grid. If tariffs remain low, electricity demand will increase. The Ministry of Energy also briefed Nepra on fuel price projections for the next fiscal year. Officials stated that the cost of gas for electricity generation was estimated at Rs1,050 per mmBtu. Thar coal is projected to cost $20 per ton from July to September and $18 to $19 per ton from October to June. Imported coal (API 4) is estimated to remain at $100 per ton throughout the year, imported coal (ICI 3) at $74 per ton and imported coal (ICI 5) at $35 per ton. Brent crude oil is expected to be priced at $74 per barrel until January 2026 and $72 per barrel from March to June 2026. According to the Nepra briefing, furnace oil is estimated to cost $522 per ton from July to December and $508 per ton from January to June. The price of high-speed diesel is expected to remain at Rs264 per litre throughout the year. The Ministry of Energy added that according to the IMF, the GDP was expected to grow by 3.6% in 2026 and electricity demand was projected to increase by 2.8% to 5%. Demand on the 132kv grid may reach between 128,000 million and 131,000 million units. Officials stated that electricity demand dropped significantly in 2023, improved somewhat in 2024 and was expected to grow steadily in the coming years.
Express Tribune
10-05-2025
- Business
- Express Tribune
Consumers pay Rs69b for idle plants
Listen to article The inefficiencies in the country's electricity transmission system have burdened consumers with capacity payments of Rs69 billion in the quarterly tariff adjustment (QTA) for ex-Wapda distribution companies (DISCOs) for the third quarter of financial year 2024-25. Three power plants had been operating at lower capacity during the period under review, but they received Rs69 billion in capacity payments, which the electricity consumers had to pay. National Electric Power Regulatory Authority (Nepra) Member (Technical) Rafique Ahmad Shaikh has pointed out inefficiencies in the country's transmission system due to which Rs69 billion was paid to three coal-fired plants in capacity charges despite extremely low utilisation. He submitted these comments in his additional note on the QTA for the third quarter of 2024-25, in which a reduction of Rs1.55 per unit was allowed to refund Rs52.6 billion to the consumers of DSICOs and K-Electric (KE) in the bills for May, June and July 2025. According to him, transmission constraints continue to limit the utilisation of several cost-effective power plants located in the southern region, notably Port Qasim, China Power and Lucky Electric. Despite their potential to provide affordable electricity, these plants reported extremely low utilisation factors – approximately 1% for Port Qasim, 10% for China Power and 0% for Lucky Electric – during the quarter. Nevertheless, they claimed substantial capacity payments amounting to Rs26.95 billion, Rs30.88 billion and Rs11.26 billion, respectively. In total, around Rs69.09 billion was claimed in capacity charges despite minimal generation. This reflects a major inefficiency in the system and underscores the urgent need to address transmission bottlenecks and improve generation dispatch practices to ensure the optimal use of the available low-cost generation resources. It is noted that the capacity claimed by DISCOs for the third quarter of FY 2024-25 amounted to Rs362.395 billion, which was significantly lower than the reference figure of Rs459.286 billion. During the same period, electricity sales stood at 19,968 gigawatt hours (GWh) compared to reference sales of 21,846 GWh in the corresponding period. Ordinarily, a decline in electricity sales would result in an upward adjustment in capacity charges due to the fixed-cost nature of capacity payments. However, during this quarter, the termination of certain power purchase agreements (PPAs) and other adjustments related to the independent power producers (IPPs) operating within the system have contributed to a reduction against the projected capacity payment. Consequently, this led to a negative adjustment in the third quarter of FY 2024-25. Although the quarterly adjustment for the third quarter decreased significantly, he said that enhanced governance and more efficient system operations could have further improved electricity sales, potentially leading to an even greater reduction in the adjustment amount. In that regard, several key observations were highlighted for consideration and focused action by the relevant stakeholders. Genco-II (Guddu old), Genco-III (TPS Muzaffargarh) and Genco-I (Jamshoro Power Company) collectively claimed capacity payments of Rs1.237 billion during the quarter – Rs469 million, Rs350 million and Rs418 million respectively – despite generating no electricity during the period. These plants are characterised by high generation costs and poor operational efficiency, with little-to-no likelihood of receiving dispatch orders from the system operator in the future, given the availability of abundant and more cost-effective surplus capacity in the system. Continuing capacity payments to such non-operational and inefficient assets imposes an unnecessary financial burden on both the power sector and end consumers. A targeted and strategic review is, therefore, essential to rationalise these expenditures and improve the overall sector efficiency.
Business Recorder
10-05-2025
- Business
- Business Recorder
Inefficiencies hiking capacity charges highlighted
ISLAMABAD: National Electric Power Regulatory Authority (Nepra) Member (Technical) Rafique Ahmad Shaikh has highlighted inefficiencies in the country's transmission system, which resulted in the payment of Rs 69 billion in capacity charges to three coal-fired power plants despite extremely low utilisation and less relief in tariff for March 2025 under monthly FCA mechanism. Shaikh made these observations in his two additional notes; i.e., on the Quarterly Tariff Adjustment (QTA) for the third quarter of FY 2024-25 whereas the second is on FCA adjustment for Discos for the month of March 2025. He also wrote a third additional note on delay in interconnection of the KE's system with NTDC due to which consumers of KE are not getting due relief in tariff. As part of this adjustment, Nepra approved a reduction of Rs 1.55 per unit, providing a total financial benefit of Rs 52.6 billion to consumers of power Distribution Companies and K-Electric (KE) in their electricity bills for May, June, and July 2025 whereas a negative adjustment of Rs 0.29 per unit was approved for Discos consumers. For KE, a negative adjustment of Rs 3.64 per unit has been approved. QTA & MTA: Nepra cuts tariffs for Discos and KE According to Shaikh, the capacity claimed by Distribution Companies (Discos) for the third quarter amounted to Rs 362.395 billion, which is significantly lower than the reference figure of Rs 459.286 billion. During the same period, electricity sales stood at 19,968 GWh—down from the reference figure of 21,846 GWh. He noted that typically, a decline in electricity sales leads to an increase in capacity charges due to the fixed-cost nature of these payments. However, this quarter witnessed the termination of certain Power Purchase Agreements (PPAs) and other adjustments related to Independent Power Producers (IPPs), which helped lower the overall capacity payments, resulting in a negative adjustment. Shaikh emphasised that although the quarterly adjustment saw a significant decrease, improved governance and more efficient operations could have further boosted electricity sales and led to an even greater reduction. To this end, he outlined several areas requiring urgent attention:(i) GENCO-II (Guddu Old), GENCO-III (TPS Muzaffargarh), and GENCO-I (Jamshoro Power Company Limited) collectively claimed Rs 1.237 billion in capacity payments— Rs 469 million, Rs 350 million, and Rs 418 million, respectively— despite generating no electricity during the quarter. These plants suffer from high generation costs and low operational efficiency, and are unlikely to receive dispatch orders in the future due to the availability of surplus, lower-cost capacity in the system. Continued payments to these non-operational units place an undue burden on the power sector and end consumers. A strategic review is essential to rationalise these expenditures and enhance sectoral efficiency; and (ii) transmission constraints are also severely limiting the utilisation of several efficient and cost-effective power plants in the southern region, including Port Qasim, China Power, and Lucky Electric. These plants reported utilisation factors of just 1%, 10%, and 0%, respectively, yet collectively claimed Rs 69.09 billion in capacity charges— Rs 26.95 billion for Port Qasim, Rs 30.88 billion for China Power, and Rs 11.26 billion for Lucky Electric. 'Such inefficiencies highlight the urgent need to address transmission bottlenecks and reform dispatch practices to ensure optimal use of the country's available low-cost power generation resources,' he added. Additional Note on FCA: In his additional note on Disco's FCA's determination for the month March 2025, he said serious efforts are being made across various forums to reduce electricity costs, several persistent issues— especially poor governance— continue to drive up electricity prices in Pakistan. The following key challenges have been outlined to help guide relevant stakeholders toward building a more efficient and sustainable power sector: (i) power generation in March 2025 was 8.5% below the reference level, partly due to AT&C-based load shedding. This AT&C based load shedding not only worsens public hardship but also results in underutilisation of 'Take or Pay' power plants, driving up costs. In March 2025, 'Take or Pay' thermal power plants, with a total capacity of 20,248-MW, operated at only 34.29% utilisation. Enhancing governance at the Disco level is essential to effectively eliminate aggregate Technical and Commercial losses; (ii) the continued outage of Steam Turbine Unit 16, ongoing since July 2022, at the Guddu 747-MW Power Plant resulted in Rs. 0.68 billion in losses for March 2025, raising total losses for FY 2024-25 (up to March) to Rs. 6.41 billion; (iii) operating the Guddu 747MW power plant in open cycle mode led to reduced output from this cost effective source, requiring the shortfall to be met through more expensive, marginal-cost plants. This shift added Rs 24 billion in extra costs in March 2025 alone, with total additional costs reaching Rs. 110 billion during FY 2024-25 (up to March). Progress on resolving the damaged steam turbine issue requires accelerated efforts; (iv) Neelum Jhelum 969MW hydropower plant has been out of operation since May 2024. Its non-availability in March 2025 forced reliance on costlier alternatives, resulting in an additional Rs. 4.5 billion in costs compared to March 2024. The total financial impact for FY 2024-25 (up to March) has reached Rs. 28 billion. Resolving the issue requires more concerted and focused efforts; (v) the HVDC infrastructure operated at only 32% utilisation in March 2025, while consumers continued to bear full capacity charges. Among other factors, a key reason for this underutilisation is the delayed completion of the Lahore North Grid Station. Efforts must be intensified to complete the task without any further delay; (vi) Transmission and grid system constraints led to losses of Rs. 0.62 billion in March 2025, bringing the cumulative impact to Rs. 12.31 billion for FY 2024-25 (up to March). Efforts should be intensified to quickly remove transmission constraints that are harming the sector's financial viability; and (vii) Part Load Adjustment Charges (PLAC) amounted to Rs. 2.6 billion in March 2025, bringing the total to Rs. 29.8 billion for FY 2024-25 (up to March). These charges are expected to rise further, as PLAC schedules for some power plants are still being finalized. A study should be conducted to reduce PLAC through effective demand-side management. He further stated that March 2025 FCA includes a negative prior period adjustment of approximately Rs. 3.29 billion. Excluding this, the FCA would have reflected a positive adjustment of Rs. 0.37/kWh. Prior period adjustments, whether positive or negative, are undesirable. To minimise their occurrence and impact, invoicing, verification, and adjustment processes should be improved, with any such adjustments limited to a maximum period of not more than two months. KE's FCA for February 2025: Member (Technical) stated that the successful enhancement of the interconnection between K-Electric and the National Transmission and Despatch Company (NTDC) to a safe operating limit of 1,600MW is a commendable step. However, efforts to further increase this capacity to 2,000MW and beyond— originally targeted for completion by June 2024— remained incomplete. In February 2025, the fuel cost in KE's generation mix stood at Rs. 20.01/kWh, significantly higher than NTDC's average of Rs. 8.23/kWh. 'If the interconnection capacity had been upgraded as planned, increased reliance on NTDC's lower-cost surplus power could have further reduced the Fuel Cost Adjustment, easing the financial burden on consumers,' he said adding that in light of the current surplus of economical generation within the NTDC system and the high cost of KE's internal generation, it is imperative that the interconnection upgrade be completed without further delay. Copyright Business Recorder, 2025
