KARACHI: With the expiry date of K-Electric’s existing 15-year tariff approaching on June 30, the power utility has requested the National Electric Power Regulatory Authority (Nepra) for a 10-year extension of the old existing tariff with minor modifications and adjustments, which the KE Shareholders’ Association find unjustified.

Among KE’s demands of modifications and adjustments is an increase of 66 paisa/kWh in the operation and maintenance component of their existing tariff. They also want a change in the percentage of the claw-back formula thresholds. In the existing tariff adjustments the level of ‘X’ factor in the O&M cost adjustment formula should be lower than the current levels, they said. Then they also want the working capital component to be included to cover the late payments of the government entities. Finally, they have asked for the Force Majeure clause to be included for the allowance of irrecoverable costs.

Nepra on their part have invited the public to intervene on the issue by sending in their arguments over the issue. General Secretary of the KE Shareholders’ Association Chaudhry Mazhar Ali has categorically replied to their requests calling them unjustified and unfair. Speaking to Dawn on Monday, he said that his first problem was that the existing tariff is already on the higher side because when it was decided, in 2002, the Karachi Electric Supply Corporation (KESC) was owned by the government and Nepra was lenient with it by allowing a higher tariff.

He also said that KESC, at the time, had a labour strength of 15,000. “Presently, this number has been reduced to 10,000,” he pointed out adding that oil prices in 2002 were also $70 per barrel, whereas oil at present is less than $40.

“The best proof of this tariff being high is that company has earned a profit of Rs86 billion rupees within a span on three years -- its profit in 2014 was Rs18 billion, in 2015, it was Rs28 billion and the expected profit in 2016 is Rs40 billion. Looking at these facts, I request a new tariff which should be lower than the old tariff.It should be reduced by 20pc at least,” he said.

About KE’s demand of an increase 66paisa per unit in O&M component, he said that it was totally unjustified because, again, the number of employees have been reduced.He also pointed out that there is no maintenance being carried out on KE’s system, which is evident from the frequent failures of system.

“The demand for increase in percentage through the claw-back formula is also totally unjustified because the consumers are paying exorbitant electric bills. Adjustment in the level of ‘X’ factor of O&M is unfair, too, because the maintenance of the system is not being carried out at all,” he said.

“About working capital,” he said, “it has been observed by the consumers, that KE is not paying their dues towards the supply of gas and also to the National Transmission & Despatch Company for the supply 650MW electricity. As such no capital is used by KE.”

KE’s demand of Force Majeure clause is also totally unjustified because in the event of any happening, consumers also suffer financially and materially, the shareholder pointed out.

Meanwhile, Tanveer Barry, chairman of public sector utilities power and gas sub-committee of the Karachi Chamber of Commerce and Industry said that KE was already minting money through illegal tactics such as taking up to Rs40,000 to Rs50,000 for NOCs for a new connection, through their new slabs system, which works to the disadvantage of consumers.

Published in Dawn, June 28th, 2016