ISLAMABAD: In a new twist to the relationship between federal government and the Karachi Electric, the former said on Wednesday it wanted to continue supplying 650MW electricity from national grid to the utility but the latter was unwilling to come to the negotiating table.
Testifying before the Senate Standing Committee on Finance and Revenue, Water and Power Secretary Muhammad Younas Dagha said some statements against the utility (by some ministers) came from the “political mouth” of the government which did not represent its “professional mouth”.
Reacting to the statement, Senator Saleem Mandviwala, who heads the committee, noted with surprise that secretary of the ministry concerned was trying to dissociate himself from public statements of ministers of the PML-N government.
Mr Mandviwala’s reaction was not without reason because the Council of Common Interests (CCI) had decided earlier to withdraw half of the 650MW supply to the KE when the relevant agreement was still valid legally and the CCI decision was blocked through a court’s stay order.
The agreement expired early this year but the stay order still holds the ground. Federal ministers are on record as having announced that they will challenge the stay orders in the Supreme Court.
Karachi Electric unwilling to come to the negotiating table
Mr Dagha said the government would like to continue supplying 650MW to the KE in one way or the other as it has been doing since the lapse of the agreement. He said that currently supplying 650MW to the KE was illegal.
He said the government also wanted to facilitate the KE through supply of natural gas but the ministry of petroleum believed that the current rates of gas being charged to the KE would lead to bankruptcy of the Sui Southern Gas Company Limited.
He said there was a way forward and the government wanted to discuss various options with the KE, but its management was not coming to the negotiating table.
The National Electric Power Regulatory Authority (Nepra) told the committee that the utility had added only 349MW to its generation system even though it was required to add 1,034MW under an agreement which provided Rs13.7 billion relief to the KE.
In a nutshell, the regulator reported that the KE had paralysed Nepra’s regulatory powers and actions through a series of stay orders granted by the Sindh High Court that remained in place for many years. It said the amended agreements between the KE and the government were required to be monitored for implementation by monitoring committees of the government. It did not say whether these committees were in place and what role they played.
Nepra officials said the KE had obtained about 10 stay orders from the court against Nepra when it twice imposed fines on account of capacity underutilisation, twice on withdrawal of 650MW, twice on account of refund of KE profits to consumers under ‘clawback’ mechanism, one each for overbilling, double meter rent charging, bank charges, issuing ‘kunda’ connections and failure to meet performance standards.
Chief Financial Officer (CFO) of the KE told the committee that power sold by the National Transmission and Dispatch Company (NTDC) to KE at Rs13 worked out at Rs15 after delivery and if it was sold to consumers at Rs12 or Rs13 under the government’s uniform rate policy, the difference of Rs2-3 has to be picked up by the federal government in the shape of subsidy.
As of now, an amount of Rs130bn was outstanding against the government on account of subsidy and the real worry was that if this amount increased to Rs250bn, how the KE would recover the amount. He said the increase in electricity rates directly increased the amount of subsidy.
He said the KE strongly rejected allegations from Nepra and its show-cause notice would be responded to in detail shortly. He said the KE had reached an agreement for improvement of its transmission system with an investment of $400 million.
The utility’s CFO claimed that his company was allowed under the law to have different loadshedding durations for various consumers even if some people might consider it discriminatory. He also claimed that the KE was getting only 171 million cubic feet of natural gas against 276 MMCFD approved by the economic coordination committee of the cabinet.
The committee would meet again in August in Karachi to further deliberate on the subject.
Published in Dawn, July 30th, 2015