KARACHI: In order to determine a balanced multi-year tariff (MYT) (from July 1 to June 30, 2016) in the matter of K-Electric’s request to the National Electric Power Regulatory Authority (Nepra) for a 10-year extension of the old existing tariff with minor modifications and adjustments, the regulatory body on Wednesday called upon eight stakeholders who had sent their concerns over the matter through letters to Nepra on its invitation to do so earlier.

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 with the working capital component to be included to cover the late payments of the government entities and the Force Majeure clause to be included for the allowance of irrecoverable costs.

Not all the interveners invited by Nepra turned up on the second day of the public hearing held at a hotel here. Among those who did, Tanveer Ahmed Barry, chairman, Public Sector Utilities, Power and Gas, a subcommittee of the Karachi Chamber of Commerce and Industry, said that before understanding the structure of the current tariff request it was important to understand the objectives of the previous tariff regime.

“Before we go into the nitty-gritty of the matter, we should understand that the tariff structure was made for the end users to gain from the efficiency of the utility if it turns profitable and have a transparent and just system of inputs while seeing an end to loadshedding, etc. But what has transpired is that the no benefit of the claw-back mechanism was given to the end user. The so-called high production levels of KE don’t have an output of more than 50 per cent and power is as expensive as ever,” he said. He also said it was a lie that the industrial sector here was exempted from loadshedding. “When I am told that 61pc of Karachi is loadshedding-free, I would also like to have a look at this break-up. Is it based on geographical details or population? The annual increase in GDP of one billion to two billion dollars is expected by reduced loadshedding but how is that calculated is not given to us,” he said while requesting KE and Nepra to refrain from issuing sweeping statements.

Syed Mujtaba Rizwi, director general of the Karachi Business Intelligence Wing, brought up the Shanghai Electric Power (SEP) and K-Electric deal.

“SEP does not have any managerial experience in the electricity distribution and supply sector. They are basically a power generation company. While it is true that Abraaj Capital is also a private equity firm and had no prior experience in this segment when they took over KESC in 2008, they learnt it the hard way over the past several years. So should we now expect SEP to go through the same learning curve and on-the-job training in dealing with the over 22 million consumers of Karachi or should the government of Pakistan proactively insist that SEP include in their consortium a qualified institutional third party that has the relevant electricity distribution and supply experience in similar markets like ours?” he said.

KE, meanwhile, shared its road map to meet Karachi’s future power demand which is forecasted to grow by 72pc to 5,200MW in the next 10 years. “A stable tariff regime which is based on performance-based benchmarks is critical to cater for additional demand of electricity in the future. The investment will substantially improve the efficiency of the power system in Karachi while enabling the utility to roll out numerous expansion and rehabilitation projects,” said a KE spokesman.

KE also reminded that it has been operating on an integrated MYT and through its previous I-MYT, they have ensured an investment of Rs120.7 billion, which is well above the proposed business plan at that time.

Published in Dawn September 29th, 2016