K-Electric seeks NEPRA approval for 7-year distribution tariff of Rs3.8357/unit

ISLAMABAD: K-Electric has submitted a request to the National Electric Power Regulatory Authority (NEPRA) for a seven-year multi-year electricity distribution tariff of Rs3.8357/unit from FY2024 to 2030.

NEPRA issued a notice to stakeholders on Friday seeking their opinion on the demand by the Karachi-based utility. The regulator has given a week to submit their opinions.Following the approval of the investment plan on April 24, 2024, this signifies the next phase of K-Electric's 7-year multi-year tariff.

NEPRA has approved K-Electric's Rs392.49 billion investment plan for infrastructure overhaul spanning years 2023-30, with allocations of Rs238.2 billion for transmission, Rs136.76 billion for distribution, and Rs17.31 billion for support projects.

The proposed base tariff component doesn't directly relate to consumers' tariffs due to government-imposed uniform tariffs nationwide, a K-Electric spokesperson stated.The tariff aims to ensure network stability for future growth and electricity delivery to consumers, following regulations applicable to the entire power sector.

K-Electric's distribution license, obtained on July 21, 2003, was initially valid for twenty years and extended for an additional six months. The NEPRA Amendment Act, of 2018 segregated distribution and supply functions, prompting K-Electric's pursuit of separate tariffs.

KE intends to improve network capacity and reliability through planned investments to meet service obligations. The Distribution network includes 2,068 11-kV feeders and 31,261 distribution transformers (PMTs/substations).

The proposed framework aligns with existing tariff structures, incorporating Return on Regulatory Asset Base (RoRB), depreciation, and Return on Equity (RoE) levels from previous Multi-Year Tariff (MYT) arrangements.

Instead of base rate adjustments, yearly investment allowances are sought.Key components of the proposal include quarterly indexation mechanisms for local debt costs, equity costs, and working capital tariffs. Operations and Maintenance (O&M) costs would be subject to recovery, with annual adjustments based on the Consumer Price Index (CPI).

Other expenses and income would also be annually adjusted, alongside provisions for recovering working capital costs.Indexation mechanisms accommodate variations in the Pakistani Consumer Price Index (CPI), US CPI, Karachi Interbank Offered Rate (KIBOR), and exchange rates on both quarterly and annual scales. Annual adjustments for foreign debt costs, including currency depreciation coverage, are highlighted.