ISLAMABAD: The Power Division has formally challenged the National Electric Power Regulatory Authority’s (Nepra) approval of a multi-year tariff (MYT) for K-Electric (KE), warning it could burden consumers and the government with over Rs300 billion in excess costs.
In a review petition to Nepra, the Power Division raised alarm over several favourable provisions in KE’s MYT for FY2024-25 to FY2030, calling them excessive compared to other utilities. Key concerns include inflated fuel cost benchmarks, generous allowances, and preferential profit margins.
Nepra set KE’s fuel cost benchmark at Rs15.99/kWh, higher than rates for other utilities, adding Rs28 billion to the federal budget in FY24 and Rs13 billion in FY25. KE was also granted a “recovery loss allowance”, despite surpassing recovery thresholds—netting the utility Rs71 billion in FY24–25 and over Rs200 billion across the seven-year period.
Other flagged issues include:
- 24% markup on working capital (Rs2.4 billion in FY24; Rs15 billion over seven years).
- Higher distribution loss target (13.90% vs actual 13.46%), costing Rs21 billion.
- A 2% law and order allowance adding Rs99 billion.
- Retention of “other income” from penalties and investments meant to offset tariffs.
- Transmission losses overstated, leading to Rs28 billion in inefficiencies.
- Idle plants still receiving Rs82.5 billion in capacity payments.
Additionally, KE receives higher return on equity (RoE) in USD terms—24.46% for generation and 29.68% for distribution, far exceeding other utilities like Fesco (14.47% in PKR).
The Power Division urged Nepra to re-align KE’s tariff with national standards for fairness and affordability, eliminating unjustified allowances and preferential treatment.
Meanwhile, during a corporate analyst briefing, KE expressed interest in acquiring other distribution companies (DISCOs) amid ongoing privatisation talks. The utility currently operates 2,397 MW of internal generation and procures 1,600 MW externally, with 400 MW more expected via new NTDC links.
Since its 2005 privatisation, KE claims to have saved Rs900 billion for the government and consumers through improved efficiency and reduced T\&D losses. Despite requesting a tariff of Rs44/kWh, Nepra approved a MYT of Rs39.98/kWh, with capped debt costs and RoE fixed at 14% for generation/distribution and 12% for transmission.
Story by Zafar Bhutta
