ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) has questioned the Ministry of Water and Power’s understanding of tariff issues and accused it of sowing the seed of discord over the latter’s assertions regarding overbilling.

On Jan 26, Water and Power Secretary Younas Dagha alleged that more than Rs62 billion had been over-billed to Karachi-based consumers over the past few years and asked the regulator to hold all those involved accountable.

The regulator had constituted a three-member committee to look into the allegations and submit a report within a week.

In its reply to the secretary, Nepra maintained that the conclusions drawn in Mr Dagha’s letter “are not only incorrect, but based on sheer misunderstanding of performance of Multi-Year Tariff (MYT) regime”, proposed and notified by the ministry itself.

The ministry gave an impression that the consumers of Karachi had been discriminated against, which it said was “not only deplorable but also tantamount to sowing the seeds of discord in society and weakening the foundations of the [federation]”, the Nepra reply stated.

Regulator slams water & power secretary for alleging Rs62 billion overbilling to KE consumers

Such baseless and unfounded allegations could have serious repercussions on the smooth functioning of the entire power sector, it said.

The ministry had expressed concern that K-Electric (KE) consumers were made to pay additional Rs62 billion due to non-adjustment of improved T&D losses and thermal efficiency in KE’s base tariff.

Nepra maintained that no excess amount had been charged from KE consumers since a uniform tariff was applicable throughout Pakistan, which also applied to KE consumers.

Although Nepra determines separate tariffs for each of the ex-Wapda distribution companies, the government of Pakistan provides subsidy or levies surcharge in order to make the consumer-end tariff uniform across the country.

The regulator reminded the ministry that the MYT determination of KE, issued by Nepra on September 10, 2002 was a performance-based tariff instated on the guidelines of the ministry and the tariff model proposed by intern­ational consultants Price Waterhouse Coopers, engaged by Privatisation Commission.

Under the MYT determination, a tariff of Rs4.74 per unit was approved, raising it by 6.5pc against the KE-proposed increase of 16pc.

“The only avenue for KE to earn profits was through bringing in efficiency by making investments from its own resource in its generation, transmission and distribution system.”

To cap any excessive profits and extend relief to consumers, a ‘Claw Back’ mechanism was made part of the MYT determination, through which KE was required to share yearly profit above 12pc with consumers on the allowed regulatory asset base.

Nepra said that KE only started making a profit in 2012, adding that excess profits earned in 2012, 2013 and 2014 — worth around Rs12 billion — had already been adjusted through the mechanism.

The performance-based tariff regime is different from the tariff regime of other ex-Wapda distribution and power generation companies.

The regulator also reminded the ministry that it was the ministry itself which notified the MYT on October 12, 2002. As per the mechanism of quarterly adjustments provided in the MYT, regular quarterly adjustments were made and duly notified by the ministry itself, which could have expressed its reservation or concerns at the time.

From the MYT award in 2002 to 2005, KE was wholly-owned by the government of Pakistan and even after its privatisation in 2005, the ministry still had about 26pc shareholding and representation on the company’s board of directors.

In case of any reservations or concerns, the ministry could have also raised it at the board level, the regulator maintained.

Published in Dawn February 9th, 2017