The government on Monday hailed the National Electric Power Regulatory Authority’s (Nepra) recent decision to slash K-Electric’s multi-year tariff, saying it will reduce the “additional burden on taxpayers” and that the move was not against the interests of Karachi’s power consumers.

Last week, Nepra reduced KE’s multi-year tariff for the fiscal year 2023-24 by Rs7.6 per unit, from Rs39.97 to Rs32.37. KE warned that the move will have “far-reaching consequences for its stakeholders, including consumers”.

Shares of KE, Pakistan’s only privatised and foreign-owned electricity utility, plunged on the stock exchange following the tariff cut, as investors sold heavily. According to a Dawn report, KE’s foreign owners are threatening to take the government to an international litigation forum. Analysts have warned that the tariff revision and regulatory uncertainty could hurt the company’s finances.

In a subsequent statement today, the Ministry of Energy’s Power Division termed those opinions a “malicious campaign”.

It said certain elements were unfortunately presenting the Nepra decision in a “distorted and misleading manner, attempting to create the false impression that the decision is against the interests of electricity consumers in Karachi”.

“The reality is exactly the opposite,” the Power Division asserted.

The Power Division spokesperson clarified that Nepra’s review in this matter was primarily related to KE’s administrative and operational affairs.

The statement read: “As a result of Nepra’s decision, the additional burden on taxpayers will be reduced, and K-Electric will be incentivised to cut losses instead of passing them on.

“Previously, due to inefficiencies, K-Electric was effectively compensated with billions of rupees in subsidies, financed through the national budget. This revised determination will help reduce that unnecessary annual fiscal burden.”

The Power Division highlighted that the regulator’s review “removes the unfair disparity” that existed between KE and public-sector distribution companies (Discos). “K-Electric must now undertake administrative reforms and demonstrate operational improvement to control its inefficiencies.”

The statement assured citizens: “There is no risk of load-shedding in Karachi arising from the retirement of loss-making or idle generation plants, because cheaper and sufficient electricity is already available in the national grid, and the infrastructure to deliver this power to Karachi consumers is in place.”

In its statement, the Power Division highlighted that before the Nepra review decision, KE had the ability to pass on “non-recovered dues to the public, effectively converting its inefficiencies into an additional burden on taxpayers”.

“Under the new framework, this will no longer be permissible. Only those receivables which K-Electric can prove — with evidence — to be genuinely unrecoverable despite all reasonable efforts will be considered by Nepra.

“K-Electric will no longer be able to unilaterally include arbitrary amounts in the per-unit cost of electricity for Karachi consumers without proof. Is this not a protective measure in favour of consumers?” the Power Division said.

Today, K-Electric Limited’s share value rose by 3.38 per cent compared to yesterday to stand at Rs5.81, Pakistan Stock Exchange’s data portal showed, marking the first increase since October 16 when it was Rs7.70.

KE consumers will continue to benefit from subsidies

The Power Division spokesperson explained that KE was currently drawing approximately 2,000 megawatts of electricity from the national grid, and “may draw even more in the future”. “This power sourced from the national grid is cheaper than the electricity generated by K-Electric’s own plants.”

The spokesperson noted that KE consumers were already being charged the same per-unit tariff that applies to consumers in other parts of the country. “Now, if K-Electric’s own internal costs are rationalised and reduced, will that become a reason to increase the per-unit tariff for consumers — or will it help maintain uniform national rates for Karachi consumers as well?

“Is that not a positive outcome for the people of Karachi?” the spokesperson rhetorically asked.

According to the Power Division, KE consumers — “like all other electricity consumers in Pakistan — will continue to benefit from subsidies, because uniform national tariffs remain in place”.

“However, this subsidy will no longer be allowed to turn into profit for K-Electric merely due to inefficiency or failure to reduce its losses. Preventing public-sector subsidy from being converted into private gain is a national responsibility.”

The Power Division noted that KE was a private-sector entity and therefore was expected to “demonstrate performance superior” to that of public-sector Discos.

However, compared to KE, the Discos of Islamabad (Iesco), Faisalabad (Fesco) and Gujranwala (Gepco) were “ahead in critical areas, including recovery of dues, reduction of line losses, and quality of service to consumers”, the statement added.

‘No entity will be able to extract unjustified profits from public’

The Power Division spokesperson asserted that the Nepra review was “critically important in terms of keeping K-Electric’s profit within a reasonable and justified limit”.

Terming the Nepra review a “landmark for the country’s regulatory framework”, the Power Division said it will also have “long-term positive effects”.

“Going forward, no entity will be able to extract unverified or unjustified profits from the public, and regulators will continue to uphold the law and protect the interests of citizens,” it declared.

The statement noted that KE had “increased its draw of electricity from the national grid, which should lead to a reduction in its monthly fuel costs”. “At the same time, Nepra has also decided to exclude those K-Electric generation plants that are currently non-operational, so that capacity-related charges from idle plants are not unfairly passed on to consumers through the per-unit tariff.”

The Power Division recalled that the government had begun a similar exercise with its own generation plants, which “helped lower the per-unit cost to consumers and eliminate unnecessary expenditure”. “If Nepra now directs that idle plants be removed from the system and their costs not be recovered from the public, is that not in the direct interest of the citizens of Karachi?” it asked.

The statement highlighted that KE’s allowed return on its invested capital ranged between 24pc and 30pc, adding that this return was linked to the US dollar.

“Under the revised framework, the dollar indexation has been terminated, as K-Electric’s assets exist in Pakistan, are denominated in Pakistani rupees, and are associated with the domestic capital market. In addition, it has now been made possible to further reduce the rate of return on K-Electric’s own plants in the same manner as in the case of re-negotiation of power purchase agreements with other independent power producers (IPPs) in the country.”

The Power Division noted that an independent consultant appointed by KE’s own Board conducted a study and allowed up to 6.5pc in losses to be built into consumer bills. The same consultant also disclosed that KE’s management “failed to sufficiently reduce losses despite incurring heavy expenditure”, according to the statement.

“In light of these disclosures, Nepra has moved to reduce the recognised loss levels. Has Nepra not acted in the public interest by doing so? The public can judge for itself,” the Power Division said.

The multi-year tariff cut

On May 27, Nepra had approved KE’s request to incorporate unrecovered bills into its consumer tariff. It set KE’s base tariff at Rs39.97 per unit for FY2023-24, which was almost 40pc higher than even the national average tariff of about Rs28 per unit in 2025-26 for the 10 public sector Discos in the country.

The next day, the Power Division announced its decision to challenge the Nepra determinations for being against the interests of the government, consumers and taxpayers.

Last week, on a set of review motions filed by the Ministry of Energy and others concerning KE’s multi-year tariff (MYT) determinations for the control period of FY2024-30, Nepra reduced the utility’s tariff by Rs7.6 per unit, effectively overturning its own May determination made after more than two years of public hearings.

KE criticised the Nepra move, saying it was “not sustainable for the company and will have far-reaching consequences for its stakeholders, including consumers”.

However, the utility clarified that the Nepra announcement by the regulator did not apply to customers and, therefore, there would be no change or reduction in monthly bills for power consumers.