ISLAMABAD: The government challenged K-Electric’s multi-year tariff (2024-30) approved by the power regulator last week, alleging the utility got an undue favour of Rs750 billion over the seven-year period at the cost of the national exchequer, power consumers across the country and taxpayers at large.

In a statement, the power division announced that the six tariff interventions allowed by the National Electric Power Regulatory Authority (Nepra) to KE entailed a financial impact of Rs453bn spread over seven years.

On top of that, the division added, a fuel cost impact higher than the national average for 2024-25 alone meant an additional cost of Rs41bn, which even if it remains flat would translate into Rs287bn in seven years.

The division said the government position was to seek review of the Nepra determination to ensure fairness and uniformity, tariff must reflect actual costs and reasonable returns to protect consumers and there should be no extra allowance for inefficiency.

“All utilities should be treated equally. KE should not receive special cost or profit allowances unavailable to other power companies,” the power division said, adding that “extra allowances for inefficiency and high profit rates must be removed to keep bills affordable”.

Regulatory accountability

At the same time, the power division called for regulatory accountability, besides revision in assumptions, benchmarks, and profit margins so that they align with real performance data and the standards used for other utilities.

It said the KE was allowed losses build-up it did not actually incur with a seven-year financial impact of more than Rs200bn and stressed that only actual losses following a due write-off process should be allowed.

The government has also challenged a two per cent allowance for law & order specific to KE with a seven-year impact of Rs99bn, followed by yet another major Rs83bn allowance for capacity payments for unutilised expensive plants of KE.

It said the regulator had been asked to revisit its recent approval of “several cost items and profit margins for KE that are higher or more favourable than for any other utility in Pakistan, resulting in unnecessarily high bills for consumers and extra pressure on public finances”.

It said Nepra had allowed inflated fuel cost benchmark to KE at Rs15.99/kWh, significantly higher than the national grid that shifted about Rs28 billion (FY24) and Rs13bn (FY25) of extra costs onto the federal budget rather than KE customers.

This perk was not granted to any other utility, even those operating in equally or more volatile regions, including Khyber Pakhtunkhwa and Balochistan.

“Moreover, law & order in Karachi has improved considerably over the last few years, and thereby there exists no reason for a such a margin,” it said.

Working capital allowance

The power division also questioned the working capital allowance permitted to KE at 24pc markup, a much higher percentage than in its previous tariff and higher than any other power distributor. “This increased KE’s allowable revenue by about Rs2.4bn in FY24 and is projected to total around Rs15bn over the control period.”

The power division said Nepra set KE’s allowed loss at 13.90pc, instead of the 13.46pc KE had proposed. These losses are on account of electricity generated but not billed, due to leaks or theft, or Kunda (illegal connections).

Around seven per cent of all such leakages can be attributed to theft, which translated into an extra Rs3.1bn burden in FY24, rising to about Rs21bn over the control period.

The power division said Nepra had allowed to KE retention of “Other Income” charged from fines imposed on its contractors, interest on bank deposits, and profits from side businesses.

KE briefing

K-Electric’s Chief Executive Officer Moonis Abdullah Alvi on Monday said the proposed MYT would not place any additional burden on consumers.

Speaking to journalists at a corporate briefing at PSX, he said under a uniform national tariff policy electricity consumers across the country pay the same rates. “There will be no special hike for Karachi consumers under MYT,” he emphasised.

Published in Dawn, June 3rd, 2025