Nepra warns KE of ‘consequences’ if loadshedding conducted in summer

Published February 24, 2021
K-Electric has warned that non availability of required gas quantities could cause power shortages in Karachi during peak summers. — APP/File
K-Electric has warned that non availability of required gas quantities could cause power shortages in Karachi during peak summers. — APP/File

ISLAMABAD: As the National Electric Power Regulatory Authority (Nepra) completed its public hearing on monthly fuel cost adjustments (FCA) and quarterly tariff adjustments (QTA) for about nine months, the K-Electric has warned that non availability of required gas quantities could cause power shortages in Karachi during peak summers.

The regulator was examining KE’s petitions for increase in electricity rates on account of fuel cost adjustments for seven months and quarterly adjustments for nine months involving an accumulated additional revenue generation of about Rs40 billion.

A KE official explained that monthly FCA requests for June 2020 to December 2020 amount to about Rs3.9bn. Of this depending on Nepra approval, Rs3.2bn will be passed on to consumers and remaining will become part of quarterly adjustments as per the given mechanism for transmission and distribution (T&D) losses and non-passing of negative FCA to certain consumer categories.

On the basis of QTA, the KE will be able to file its Tariff Differential Claims of about Rs39bn for July 2020 to March 2021 after determination by the regulator.

All these adjustments have been sought on the basis of previous petitions on which the regulator had conducted public hearings in September last year for period up to March 2020 but a final determination is still pending.

The KE reminded the power regulator that its previous adjustments of over Rs119bn were still outstanding, causing cash flow problems to power utility which needed to be settled at the earliest.

Nepra criticises KE

During the hearing, Nepra chairman Tauseef H. Farooqui criticised KE for not following the merit order in the operations of the power plants. But the KE team explained that the power company strictly followed the merit order to the maximum level but it was compelled to use expensive fuel when it faced gas pressure problem and power demand from the consumers had to be met at any cost to avoid public miseries.

During the hearing, the chairman warned the KE of consequences if the people of Karachi suffered loadshedding in summer.

However, the KE team reported that first unit of the 900MW new Bin Qasim Power Plant would be ready by May 15 to generate about 450MW but serious problem could arise due to inadequate gas supplies as the Sui Southern Gas Company (SSGC) was not ready to sign a gas supply agreement despite best efforts by KE.

About reduction in tariff on account of quarterly adjustments, the negative adjustment in April to June 2020 was mainly attributable to lower fuel prices which dropped due to Covid-19, followed by a gradual increase in the second half of the year. Furnace oil prices also dropped from Rs57,000 per tonne in March 2020 to Rs35,000 per tonne in May 2020 and then increased to Rs55,000 per tonne during July to December 2020.

Similarly, RLNG prices dropped from Rs1,800 per MMBTU in March 2020 to Rs1,040 per MMBTU in June 2020 and then increased to Rs1,300per MMBTU in Dec 2020.

It was explained that variations in QTAs would not impact the consumers negatively owing to the government policy of uniform consumer tariff across the country. However, these amounts would be payable to KE through tariff differential subsidy from the federal government.

Published in Dawn, February 24th, 2021

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