KE seeks massive Rs11.34 hike in monthly fuel cost adjustment

Published June 24, 2022
Prime Minister Shehbaz Sharif chairs a meeting of a K-Electric delegation in Islamabad on Thursday. — PID website
Prime Minister Shehbaz Sharif chairs a meeting of a K-Electric delegation in Islamabad on Thursday. — PID website

ISLAMABAD: A group of leading Saudi and Kuwaiti investors of K-Electric Ltd had a busy day on Thursday lobbying with top government functionaries to end the impasse over hundreds of billions of rupees worth of unsettled claims and counter claims as the Karachi-based power utility sought an unprecedented Rs11.34 per unit increase in its monthly fuel cost adjustment.

The non-settlement of financial claims on K-Electric by the government-owned electricity and fuel suppliers and vice versa has been hampering the transfer of the troubled private power utility to Shanghai Electric of China, which reached a deal with K-Electric’s majority shareholders in 2016 to buy over 66 per cent of its shares for $1.77 billion. The KE delegation met Prime Minister Shehbaz Sharif and his ministers besides the chairman of the power sector regulator and other influential stakeholders.

Informed sources said Prime Minister Sharif asked the energy sector task force led by former premier Shahid Khaqan Abbasi to ensure the resolution of all outstanding issues pertaining to K-Electric within three months. The company has over Rs400bn of payables to the Central Power Purchasing Agency and over Rs200bn to Sui Southern Gas Company Ltd and has similar claims of receivables against the federal and provincial government entities.

Separately, it asked the regulator — National Electric Power Regulatory Authority (Nepra) — to allow an additional fuel cost of Rs11.34 per unit under the monthly fuel cost adjustment (FCA) for electricity sold in May to generate about Rs22.65bn in the coming month.

In a petition, the power utility said it charged a reference fuel cost rate of Rs16.88 per unit in May, which turned out to be Rs28.22 per unit and resulted in a gap of Rs11.34 per unit because of about 143pc higher fuel cost of its own and 52pc on account of the power purchase cost, including that of the national grid.

The price of furnace oil in May increased 38pc from March while the price of RLNG increased 50pc, it said.

Nepra has called a public hearing on July 4 to examine if K-Electric’s request for a fuel cost variation was justified and if it had followed the economic merit order while procuring electricity from the national grid, its own power plants and other external sources. Once approved, K-Electric will be able to collect Rs22.65bn from consumers through their monthly bill of August on account of the FCA.

An official statement said Minister for Power Khurram Dastgir Khan expressed his concerns over the modernisation and digitisation of K-Electric and stressed that the company needs to focus on customer facilitation and service delivery.

K-Electric said a delegation of its majority shareholders representing Saudi Arabia’s Aljomaih Holding Company, Kuwait’s National Industries Group (NIG) and Infrastructure Growth and Capital Fund (IGCF) held a meeting with Prime Minister Sharif on Thursday.

The delegation briefed the premier about the utility’s achievement in the last 17 years. “We opted to invest in the power sector – which is the backbone of any economy – of Karachi that holds a special place as Pakistan’s financial and industrial hub,” the statement quoted Mr Aljomaih as saying.

Published in Dawn, June 24th, 2022

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