KE given go-ahead for unprecedented Rs9.42 tariff hike for May

Published July 5, 2022
A technician from K-Electric fixes new electricity meters at a residential building in Karachi. — AFP/File
A technician from K-Electric fixes new electricity meters at a residential building in Karachi. — AFP/File

ISLAMABAD: The National Electric Pow­er Regulatory Authority (Nepra) on Monday allowed K-Electric to raise about Rs19 billion additional funds in August by charging an unprecedented additional fuel cost adjustment (FCA) of Rs9.42 per unit to consumers on electricity they consumed in May.

At a public hearing presided over by Nepra Chairman Tauseef H. Farooqui, the regulator considered KE’s request for an increase of Rs11.34 per unit for the said month to raise Rs22.65bn but after minor disallowances worked out an increase of Rs9.42 per unit. Nepra found that KE had assumed its fuel cost for import from the national grid at Rs13.90 per unit while it was Rs13.83.

The regulator deducted an FCA of Rs1.68 per unit on the disparity in fuel prices and 24 paise per unit on account of under-utilisation of efficient plants, thus bringing down the FCA to Rs9.42 instead of Rs11.34 per unit claimed by KE.

The Karachi-based private power utility had also asked the regulator to allow it to charge these rates in July to ease its financial issues. Mr Farooqui, however, declined the request for billing such a heavy amount to consumers in July when they were already being charged Rs5.28 per unit FCA for electricity consumed a preceding month – April.

Nepra members criticise utility for not utilising cheaper fuel

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

The major impact on the monthly fuel cost adjustment in May is due to an increase in the fuel price increase of furnace oil and power purchased from the Central Power Purchasing Agency (CPPA). The price of furnace oil in May increased by 38pc from March while the price of RLNG between March to May increased by 50pc.

The KE’s team led by its chief executive officer Moonis Alvi told the regulator that the major factor for higher FCA was the fuel price spike in the international market. Also, the KE was given lower quantities of RLNG because of the default in LNG supplies.

Nepra members Rafique A Shaikh and Maqsood Anwar criticised the power utility for not utilising available cheaper fuel but the KE’s team contended it was not available. The members asked why it did not pick wind power from Jhimpir and Thatta corridors.

The KE’s team, however, explained that the power utility could have a maximum intake of 1,400MW from the national grid and since the power shortage was a national phenomenon, KE was getting about 1,100MW from the national grid.

A representative of the Karachi Chamber of Commerce and Industry Tanveer Bari said the increase in FCA was unprecedented and would lead to the closure of the industry. He accused the KE of doing nothing to upgrade its system. The Nepra chief agreed that KE needed to come up with out-of-the-box solutions and consider renewables for cheaper energy.

The KE’s representatives said the utility would generate about 800MW of solar energy in four years and was also working on 600MW local coal-based power plant. Mr Alvi said cheaper LNG was not in foresight and the company would exploit all options.

Under the tariff mechanism, changes in fuel cost are passed on to consumers only on monthly basis through an automatic mechanism while quarterly tariff adjustments on account of variation in the power purchase price, capacity charges, variable operation and maintenance costs, use of system charges and including the impact of transmission and distribution losses are built in the base tariff by the federal government.

Published in Dawn, July 5th, 2022

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