National Electric Power Regulatory Authority (NEPRA) has announced its decision on K Electric’s (KE) multiyear tariff (MYT). The power regulator has reduced the MYT by Rs. 2.19 from existing rates.
The newm lowered tariff may lead to end Shanghai Electric’s takeover bid for KE, who were pushing for a higher tariff rate.
NEPRA issued a detailed decision on this matter after a reconsideration request was filed by the Federal Government regarding the Multi Year Tariff (MYT). The newly announced MYT is valid for the period commencing from July 2016 to June 30th, 2030. In its decision NEPRA reviewed all technical aspects as well as the public comments.
The order was signed by Chairman NEPRA Tariq Saddozai, Vice Chairman Sayed Masood Ul Hassan Naqvi, Members Himayat Ullah Khan, Saif Ullah Chattha. However, one member of the committee did not sign it. Rehmat Ullah’s signature was missing.
In its decision, the regulator described that KE wanted to follow the old MYT framework for the next 10 years, but with an increase of around Rs. 0.66 per kWh in the tariff from the current tariff of around Rs. 15.50 per kWh to Rs. 16.10 per kWh.
But instead of increasing it, NEPRA actually reduced the tariff by Rs.2.80 and set the new MYT at Rs. 12.70 per KWh from July 01, 2016 for the next 7 years.
“On October 09, 2017, the Authority enhanced the MYT to Rs. 12.7706 per kWh on the account of a revised investment plan, load shedding assumption, T and D losses, heat rates, cost of debt and load growth. KE will carry out planned investments worth Rs. 355 billion,” described NEPRA.
NEPRA further said that this MYT awarded to KE was an incentive-based tariff. With this, KE was incentivized to earn profits by bringing efficiency and through making investments in its generation, transmission and distribution segments.
To cap any excessive profits and to extend relief to the consumers, a Clawback Mechanism was devised to share its yearly profit above 12 percent with consumers on the allowed Regulatory Assets Base (RAB).
Under the referred tariff control period (2009-2016), KE turned into a profit making entity, while its performance regulatory benchmarks were not being achieved.
The main reason behind these profits was the due to efficiency gains recorded by the generation segment. The other segments did not show the required level of improvement as required under the previous MYT.
KE’s spokesperson refused to comment when pressed about this situation. He said this is a technical issue and that the new MYT will not affect consumers.
Informed sources in the power sector told ProPakistani that this MYT decision will impact KE’s takeover agreement between Shanghai Electric and Abraaj Group.