NEPRA Questions Internal Delays in Determining KE’s Generation Tariff During FCA Hearing 

NEPRA’s member Rafique Ahmed Sheikh Thursday questioned its case-officer for delays in determining K-Electric’s generation tariff which has gone through delays.  

The case officer confirmed that the generation tariff component is nearing completion, and the MYT is expected to be finalized within a few weeks. This came to light during a public hearing for K-Electric’s request for a provisional fuel charges adjustment (FCA) of PKR 0.51/kWh for August 2024, the company said in a press statement.

KE CFO Aamir Ghaziani revealed that this delay, spanning over two years, has hindered the utility’s ability to fulfill statutory requirements, lately including filing financial statements with the Pakistan Stock Exchange. 

During the hearing, it was also revealed that K-Electric could potentially save the government up to 80 billion rupees in tariff subsidies if it were provided with natural gas instead of the more expensive RLNG. This significant cost-saving could lower the overall electricity cost for consumers. The company also reported a modest 1 percent year-on-year demand growth from August 2023 to August 2024, contrasting with a declining demand trend in other distribution companies. 

Addressing concerns about supplying captive industries, KE CFO Aamir Ghaziani refuted recent statements made by Karachi Chamber of Commerce & Industries President Javed Bilwani. Ghaziani clarified that KE already serves over 50,000 industrial units of varying sizes and is prepared to extend services to captive industry units within its territory. 

Industrialist Rehan Jawed representing the Korangi Association of Trade & Industry (KATI), raised concerns about the government’s preferential treatment of captive industries, which receive cheaper natural gas compared to other industrial units. Advising Government of Pakistan for not risking the IMF’s bailout package of $7 billion on wrongful propaganda by KCCI on behalf of only a few units of captive industries, he advocated for redirecting cheaper natural gas to government and KE power plants, emphasizing their higher efficiency compared to captive power units.  

Rehan Jawed, President of KATI’s Energy Committee, and a staunch longtime advocate for dorecting cheaper natural gas to grid also underscored that the K-Electric’s generation tariff under the new Multi-Year Tariff should be determined at the earliest. He added that just 100 MMCFD of natural gas supplied to K-Electric could save an estimated 80 billion rupees in subsidies for Karachi’s power consumers. Rehan also shared that the capacity cost borne by customers on the grid would be around PKR 132 million due to captive using the grid as a backup arrangement for power supply. 

The discussion then shifted to KE’s generation capacity and the feasibility of matching the central grid’s (CPPA-G) lower electricity costs. Arif Bilwani from Karachi Industries inadvertently acknowledged the efficiency of KE’s latest power plants, BQPS III and BQPS II, and highlighted that CPPA-G benefits from cheaper energy sources like hydropower. He said that due to the fact, an apple-to-apple comparison between generation cost of K-Electric and CPPA-G would be simply unfair.  

The hearing also highlighted the private sector’s confidence in K-Electric’s renewable energy initiatives. KE’s recent bidding process for renewable energy projects attracted substantial interest from local and foreign investors, NEPRA noted, resulting in a record-low tariff bid of 3.88 cents.  

He said that the success demonstrated the private sector’s trust in renewable energy development by the private sector, contrasting with a previous government-led bidding effort that failed to attract any bids, unfortunately. 

NEPRA has reserved its decision on KE provisional FCA request and will announce its ruling on the final adjustment and the duration over which it will be charged to consumers.