K-Electric to increase tariff, NEPRA allows

ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) has authorized K-Electric to raise the electricity tariff to Rs1.97 per unit for a period of three quarters.

Currently, the government is implementing a strategy of uniform tariffs for all electricity delivery firms. The same policy applies to K-Electric as well.

With a strategy of standardized market tariffs around the world, these differences will not affect customers and will be included in the government’s tariff differential subsidies. However, Nepra permitted K-Electric to reduce the power tariff by Rs0.02 per unit by one-fourth.

Nepra has fixed the quarterly tariff difference for the period from April 2019 to March 2020 for the period from July 2019 to June 2020.

The regulator approved a tariff rise of Rs0.78 per unit for the period from April to June 2019, Rs1.97 per unit for the period from July to September 2019, and Rs0.61 per unit for the period from January to March 2020.

Nevertheless, it agreed to cut the power price for the quarter of October to December 2019 by Rs0.02 per unit.

Nepra, in a notice, stated that since the federal government had a uniform tariff policy throughout the country, as well as for K-Electric customers, the effect of the previously mentioned quarterly changes will be adjusted in the tariff differential subsidy for K-Electric. They could also have little effect on customers.

The decisions are consistent with the process set out in the K-Electric Multi-Year Tariff, whereby improvements in fuel rates, generation and power purchasing mix are passed together with some annual modifications.

It is necessary to remember that K-Electric has already borne these expenses and charged the costs to fuel supplies and external electricity purchases.

Pursuant to the notice of the existing multi-year tariff, K-Electric filed its quarterly request for an adjustment to the power purchase price (PPP), an indexation of O&M prices, an adjustment to transmission and distribution losses, etc. for the quarters ended June 2019 and September 2019, along with supporting documentation.

However, K-Electric also demanded write-offs in the sum of Rs4, 051 million (gross) for FY2018-19. The net sum reported by K-Electric after accounting for the recovery made through the write-off portion of the 2017 Multi-Year Tariff, i.e. Rs2, 994 million, was Rs1, 056 million.

Amreli Steels, as an intervener, argued that Nepra should at best approve and assess only certain fuel price changes and quarterly adjustments to the power distribution companies that had been filed with the authority as per the timeline.

The Karachi Chamber of Commerce and Industry (KCCI) highlighted the problems of the former multi-year tariff, i.e. an increase in tariffs by Rs0.15 per kilowatt-hour (kWh), a loss of approximately 4,500 workers and a non-addition of 1,000 megawatts of electricity production.

It was mentioned that K-profit Electric’s for FY19 rose to Rs 17.3 billion compared to Rs 12.3 billion for FY18, but it was shocking that the firm made zero profit to be repaid.

It requested Nepra to determine the exact amount owed by K-Electric and to withhold any clearance until it had been charged to the end-users.

According to the K-Electric spokesperson, Nepra’s new determination on K-fuel Electric’s cost adjustment and tariff difference statements amount to an extra Rs80 billion in subsidies.

“This number is for 12 calendar months, and while it has been calculated by Nepra, it has not yet been informed by the Government of Pakistan.”

The source stated that the invoice, which is liable to K-Electric, is in addition to more than Rs130 billion in previous tariff differential charges which have been notified and have been pending for many years.

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