KE plea for tariff rise met with tough questions

Updated 17 Sep 2020

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K-Electric is seeking a 65 paisa per unit increase in the base rate on account of cost of working capital (government entities). — Reuters/File
K-Electric is seeking a 65 paisa per unit increase in the base rate on account of cost of working capital (government entities). — Reuters/File

ISLAMABAD: While taking up a petition for a Rs1.54 per unit increase in electricity rates for Karachi-based consumers, the National Electric Power Regulatory Authority (Nepra) on Wednesday questioned K-Electric over its alleged unmet investment targets.

Nepra chairman Tauseef H. Farooqui presided over a public hearing on a KE petition, seeking a Rs1.54 per unit increase under its mid-term multi-year tariff (MYT) regime. The hearing will continue on Thursday (today).

In its July 5, 2018 MYT determination, Nepra had envisaged a mid-term review to the extent of allowed investments on completion of three-and-a-half years of MYT under which KE is seeking upward revision in tariff.

The utility had sought an additional investment of Rs144bn other than Rs299bn allowed in the MYT by revising the total investment to Rs443bn.

It has also demanded relief for increasing the impact of exchange rate on allowed Return on Equity.

K-Electric is seeking a 65 paisa per unit increase in the base rate on account of cost of working capital (government entities), 10 paisa per unit increase as revision in debt cost, 29 paisa per unit increase in the base rate on account of revision in the sent-out growth and 50 paisa per unit increase in the base rate on account of normal cost of working capital.

The Nepra team noted that the objective of mid-term review was to look into the investment of K-Electric but the utility’s application involved various things which were outside the scope of mid-term review.

Nepra Chairman Farooqui observed that K-Electric was claiming its performance which was not visible on ground.

“If it had made improvement, it should have been visible,” he said, adding that there were contradictions in K-Electric’s claims and reality. “We cannot allow investment on K-Electric’s claims,” Mr Farooqui added.

Nepra’s team pointed out that K-Electric, under its mid-term investment plan, had achieved only 39pc progress and it was again seeking permission for Rs144bn investment.

KE’s Chief Financial Officer Aamir Ghaziani said the utility wanted to continue increased spending in generation, transmission and distribution. Since 2016, he said, rupee devaluation had led KE to bear Rs58bn because allowed exchange rate was Rs121 per dollar against the actual exchange rate of Rs155.

He said the Rs24bn increase in capital expenditure was on account of investment in interconnection facilities which was not part of originally approved plan while Rs43bn had been spent on improving safety and reliability of electricity infrastructure since 2018/19 rainfall.

The number of feeders included in the annual preventive maintenance had increased from 100 to 300.

Mr Ghaziani said the overall efficiency of the generation fleet had improved from 95pc to 98pc since 2016 while system availability had improved from 81pc to 91pc.

He also claimed that generation fuel efficiency benefit of Rs14bn had been passed on to the consumers and tripping on the transmission network had gone down by 56pc since 2016.

Total transmission capacity has increased to 9,916 MVA from 6,300 MVA since 2016. Likewise, 670,000 customers had been added from 2016 to 2020 and an additional 1,400MW of electricity will be acquired from the national grid by 2023 with the construction of two interconnection facilities, he added.

The Aggregate Technical & Commercial Loss has been reduced from 68pc to 25pc, Mr Ghaziani said, adding that 93pc of Karachi will be free from load-shedding by 2023 compared to 75pc at present and 6pc at the time of privatisation.

Published in Dawn, September 17th, 2020