Latest news with #Rs15.99
Express Tribune
30-06-2025
- Business
- Express Tribune
NEPRA grills Power Division over FCA deferral
The National Electric Power Regulatory Authority (NEPRA) held a heated hearing on the Power Division's request to defer April 2025's Fuel Cost Adjustment (FCA) of Rs4.69 per unit for K-Electric (KE) consumers. The proposal drew sharp criticism from NEPRA members and Karachi's power consumers, who questioned both its legality and timing. NEPRA Member Legal Amina Ahmed criticised the Power Division's abrupt change of stance, noting that the reference price of Rs15.99 had remained unchanged for two years. She argued there was no legal or practical basis for the deferral and called out the ministry for its delayed response. When asked about policy guidelines and cabinet approval, the ministry's representative gave a 10 to 15-day timeline. KE's representative informed the regulator that Rs7.173 billion in relief was due to be passed on to consumers, noting that the utility had offered negative FCA adjustments since September 2024. The Power Division argued that deferring the FCA was necessary to safeguard the federal budget, warning that immediate implementation could place further fiscal strain on public finances. NEPRA, however, dismissed the plea, stating that it lacked legal merit and procedural basis. NEPRA Senior Legal Advisor Ahmed Ibrahim asserted that NEPRA held exclusive jurisdiction over tariff matters. He said no court order existed to halt the process and that the ministry's petition was premature. Without a stay order, NEPRA's earlier determination remains binding. He further clarified that the Ministry of Energy's administrative role did not entitle it to interfere in regulatory decisions. NEPRA chairman echoed these sentiments, noting the hearing had been scheduled in advance and the deferral request came too late. He questioned why the legal process hadn't been followed earlier. KE CEO Moonis Alvi said KE would comply with NEPRA's decision but urged that fairness be considered. He added that industrialists planning production and exports faced uncertainty due to the ambiguity. Karachi-based industrialist Rehan Javed said the Power Division never objected when positive FCA adjustments led to higher tariffs for Karachi. He called the sudden concern selective and biased, pointing out that Karachi consumers also paid the PHL surcharge despite not contributing to the circular debt. He reminded NEPRA of International Monetary Fund (IMF) demands for timely tariff adjustments and greater efficiency. Javed stressed that any subsidy settlements between the government and KE were unrelated to the current FCA issue and demanded NEPRA act independently. He added that while Karachi stood to gain this time, it had often borne the brunt of losses in the past. Participant Arif Bilvani voiced frustration over the Power Division's belated intervention. He argued that Karachi consumers deserved the relief now, just as they had borne excessive charges earlier. KCCI representative Tanveer Barry called the Power Division's objections "unfair," highlighting that Karachi was being penalised despite not contributing to the circular debt. The session concluded with NEPRA reaffirming that decisions must be made transparently and free from ministry pressure. A final ruling is awaited and is expected to have wide implications for Karachi's power consumers. DISCOs tariff may rise Rs1/unit Separately, NEPRA also held a hearing on the May 2025 FCA request for DISCOs, in which the Central Power Purchasing Agency (CPPA-G) warned that power tariffs could rise by up to Rs1 per unit from July 1 due to increased gas prices for power generation. CPPA-G initially sought a 10 paisa per unit increase for May, which NEPRA said it would consider after reviewing the data. According to CPPA-G, the 10 paisa hikeif approvedwould be applicable for one month only and add Rs1.25 billion to consumer bills. The reference fuel cost for May was Rs7.39/unit, compared to Rs7.49/unit in April. CPPA officials warned that higher gas prices would likely push tariffs up by Rs1 per unit. They also cautioned that without improved bill recoveries, the government may resort to raising surcharges to manage the ballooning circular debt. Currently, consumers are paying a Rs3.23 per unit surcharge solely for interest payments on circular debt. This amounts to Rs323 billion annually. According to CPPA-G data, actual fuel cost for May was Rs7.4940 per kWh, while the reference cost was Rs7.3925an increase of Rs0.1015/unit.
Express Tribune
02-06-2025
- Business
- Express Tribune
MYT impact estimated at over Rs300b
The Power Division has urged Nepra to align KE's tariff structure with national standards to ensure fairness, transparency and affordability. photo: file The Power Division has challenged the regulator's decision on granting a multiyear tariff (MYT) to K-Electric (KE), alleging that it will allow the company to collect over Rs300 billion from consumers. "The total financial impact is in excess of Rs300 billion of the interventions identified for review by the government of Pakistan in the KE MYT," the division said in a review petition submitted to the National Electric Power Regulatory Authority (Nepra). It has asked Nepra to revisit its recent approval of electricity rates for KE, Karachi's main power supplier. KE's new tariffs come into effect from financial year 2024-25 and will run through FY30. The government believes that Nepra has allowed several cost items and profit margins to 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. The Power Division has raised serious concerns over the preferential treatment granted to KE. Nepra set KE's fuel cost benchmark at Rs15.99 per kilowatt-hour (kWh), significantly higher than the rates paid by other utilities purchasing power from the national grid. This discrepancy adds Rs28 billion in FY24 and Rs13 billion in FY25 to the federal budget, shielding KE customers from these costs. KE also received a "recovery loss allowance," despite its actual recoveries exceeding the threshold set by Nepra. No other utility enjoys this privilege, which has generated Rs36 billion in FY24 and Rs35 billion in FY25 for KE, amounting to over Rs200 billion in seven years. Furthermore, Nepra allowed KE a 24% markup on working capital – higher than any other utility – boosting revenue by Rs2.4 billion in FY24 and Rs15 billion over seven years. Additionally, a higher distribution loss target of 13.90% (vs KE's own 13.46%) was set, passing Rs3.1 billion in FY24 and Rs21 billion over the seven-year period on to consumers. A unique 2% "law and order" margin was granted to KE, despite an improved security situation. This adds Rs14 billion in FY24 and Rs99 billion over seven years. KE was also allowed to retain "other income" from fines and investments, which should have offset customer costs. Transmission losses were overestimated at 1.30% (vs actual around 0.75%), and KE keeps 75% of savings, creating inefficiency and costing Rs4 billion in FY24 and Rs28 billion over the seven-year period. Excessive returns were also permitted. KE enjoys a 12% return on equity (RoE) in US dollar (around 24.46% in Pakistani rupee) on generation, compared to National Transmission and Despatch Company's (NTDC) 15% in rupees, and 14% RoE in US dollar (around 29.68% in PKR) on distribution, far exceeding the 14.47% RoE in rupees for others like the Faisalabad Electric Supply Company (Fesco). Idle KE power plants still receive capacity payments, costing Rs12.7 billion in FY25 and Rs82.5 billion overall. Generous inflation indexation and a 17% RoE for these plants further strain finances. The Power Division urged Nepra to align KE's tariff structure with national standards to ensure fairness, transparency and affordability, stressing the need to eliminate unjustified allowances and ensure equal treatment for all utilities. KE eyes DISCO acquisitions K-Electric held a corporate analyst briefing on Monday to provide insights into its recently approved tariffs and operational updates. The company expressed openness to acquiring other DISCOs (distribution companies), should the privatisation process move forward, according to Arif Habib Limited. Its management highlighted that KE's total generation capacity currently stands at 2,397 megawatts (MW) from internal sources, while it procures over 1,600 MW externally. With the anticipated completion of NTDC interconnection projects, an additional 400 MW is expected to be integrated into its grid. The utility's robust transmission network now comprises 7,095 MVAs capacity, 74 grid stations and 1,394 km of lines, while its distribution infrastructure includes 8,964 MVAs capacity, 2,112 feeders and over 31,000 pole-mounted transformers (PMTs). Since its privatisation in 2005, KE has added 1,957 MW to its generation capacity, improved efficiency from 30% to nearly 46%, doubled transmission capacity and cut transmission and distribution (T&D) losses from 34.2% to 16%. The utility estimates a cumulative saving of Rs900 billion for the government and consumers, alongside annual fiscal savings of Rs164 billion due to lower aggregate technical and commercial (AT&C) losses. Nepra has approved a multi-year tariff (MYT) structure of Rs39.98/kWh for KE, lower than the utility's request for Rs44/kWh. Return on equity (RoE) has been set at 14% for generation/distribution and 12% for transmission, with a 70:30 D/E ratio. The cost of local and foreign debt has been capped at Karachi Interbank Offered Rate (Kibor) + 2% and Secured Overnight Financing Rate (SOFR) + 4.5%, respectively.
