Nepra, consumers grill KE over loadshedding, tariff increases

ISLAMABAD: The K-Electric (KE) remained under attack on Thursday from consumers and the power regulator for prolonged load shedding in many parts of Karachi on the second day of public hearing on its request for Rs1.54 per unit increase in its electricity sale rates.

The National Electric Power Regulatory Authority (Nepra) reserved the judgement and asked the power utility company not to carryout load shedding during night hours so that the people can have a peaceful sleep. Nepra Chairman Tauseef H. Farooqui presided over the hearing for upward revision in tariff under its mid-term multi-year tariff (MYT) regime.

Farooqui said the KE management was reactive to events instead of planning for the future. “Why you don’t foresee the future, how will it work out if you are reactive to everything”, he questioned.

In its July 5, 2018 MYT determination, Nepra had envisaged a mid-term review to the extent of allowed investments on completion of three-and-a-half years of MYT under which KE is seeking upward revision in tariff. The KE had sought an additional investment of Rs144 billion other than Rs299bn allowed by the regulator in the MYT.

On the second day of the hearing, Jamaat-e-Islami, Karachi’s Hafiz Naeem ur Rehman criticised the utility company for prolonged load shedding across the city and for playing with people’s lives.

“On what basis KE is asking money for investment. What betterment have they brought to Karachi power supply,” he said and questioned as to why regulator had not yet cancelled KE’s licence. He urged the regulator that the KE should not be allowed increase power tariff.

During the hearing, consumers from Karachi complained that the KE was carrying out maximum load shedding in off-peak hours while in peak hours there were minimum outages. In peak hours, the power tariff is Rs20.70 per unit against off-peak rate of Rs14.38 per unit.

Consumers asked the regulator to allow more power distribution companies to operate in the city to promote healthy competition. A representative of the regulator said a separate hearing would be held in Karachi on September 21 to consider the question of ending exclusive distribution rights to KE.

KE’s Chief Financial Officer Muhammad Aamir Ghaziani said the demand of electricity in Karachi stood at 3,200MW against an availability of 2,800MW, leaving a shortfall of about 400MW. He attributed the electricity shortage to low gas pressure.

In a response to question from Nepra chairman, Ghaziani said the utility company was carrying nine hour load shedding in high loss areas, three to four hours in middle loss areas while only two hours in the areas with low losses. He said the first unit of 900MW plant will begin generation in 2021.

Nepra chairman said since the power plant was delayed because of the KE, therefore, the regulator will not transfer the burden to consumers.

KE CFO further informed that the approved MYT assumed an exchange rate of Rs120 per dollar in December 2019 which actually turned out to be Rs159, thus having material implications for the company.

Furthermore, there had been additional costs resulting from adjustments to the approved investment plan because of changing operational dynamics as well as increasing working capital requirements and financing costs on account of burgeoning government outstanding subsidies. He said all of these factors were beyond the control of the power utility.

The CFO said that since 2017, 423MW electricity had been added to the system. For the maintenance of KE plants, around Rs16bn were demanded.

Nepra chairman asked why the utility was asking funds for maintenance as funds were already allocated for operation and maintenance in the tariff. The CFO replied that extra money was spent on the machines.

He also asked the KE to provide expenditure record for operation and maintenance and contractors it had hired for O&M work.

KE officials said the utility company invested around Rs29bn over and above the funds allowed by Nepra in the generation and distribution which had resulted in significant improvements in generation fleet reliability and availability.

They said the efficiency improvements were passed on to consumers along with significant improvements at consumer level including reduction in load shedding.

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