NEPRA Announces Lower Than Expected Tariff For K-Electric

National Electric Power Regulatory (NEPRA) revised the multi-year tariff for K-Electric Limited (KEL) consumers by Rs. 3.5 per unit in March 2017. The new tariff will stay in effect for a seven-year term from July 2016 to 2023. The cut in tariff was a negative for KEL, impartial for purchasers and positive for the administration.

Earlier this month, K-Electric investors demanded NEPRA to review the Multi Year Tariff (MYT) petition in order for KE to ensure that all stakeholders’ interests are protected. The long-term business assurance and continuity of a performance based multi-year tariff structure is vital for K-Electric to put resources into enhancing Karachi’s energy foundation so as to meet the ever increasing energy demands of the city.

Read More: NEPRA Approves 33 Cut In Electricity Prices

NEPRA, after reviewing the petition, has now announced a base tariff of Rs.12.8/kWh, however, K-Electric, in its tariff petition, sought Rs. 15.9/kWh. It was providing a base tariff of 12.1/kWh to KEL before. This increase of 6%, however, would not change much for KEL and they would still have a face a poor return by KEL shareholders as per their prior agreement.

The reputed electric organization has estimated a loss of Rs. 3.9 Billion at a tariff of Rs. 12.1/kWh for the year of 2017. With a minimal increase by NEPRA in MYT, KEL claims that it would only sparingly improve the statistics with now a loss of Rs. 3.7 Billion.

Other salient features of the tariff include, cost plus basis tariff (K-Electric however claims to have a performance based tariff) which has been maintained and an allowable CAPEX has boosted to Rs. 299 Billion from Rs. 238 Billion over a span of seven years, accompanied by an increased base rate adjustment component from Rs. 0.55/kWh to Rs 1.05/kWh

The lower Multi Year Tariff for K-Electric has also affected the decision of Shanghai Electric who were aiming to acquire KEL and were awaiting the outcome of the review tariff from NEPRA. Shanghai Electric has delayed the acquisition after the results and is now expected to amend its bid or may even, unfortunately, pull out altogether.