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Friday May 24, 2024

KE faces scrutiny over costly power generation, loadshedding in Nepra hearing

Consumers, stakeholders and the regulatory body expressed grave concerns over the utility’s fuel choices

By Israr Khan
May 10, 2024
A representational image of K-Electric logo. — Twitter/File
A representational image of K-Electric logo. — Twitter/File

ISLAMABAD: K-Electric (KE) faced an intense scrutiny Thursday during a public hearing convened by the National Electric Power Regulatory Authority (Nepra) over escalating power tariffs and persistent loadshedding.

Consumers, stakeholders and the regulatory body expressed grave concerns over the utility’s fuel choices, costlier generation, operational inefficiencies and safety risks.

The power regulator called the hearing in response to a petition by K-Electric (KE) regarding provisional monthly fuel charge adjustments (FCAs) for the period spanning July 2023 to March 2024.

Notably, both consumers and stakeholders criticised Nepra, alleging leniency in the K-Electric case and accusing the regulator of approving demands without considering the impact on consumers.

K-Electric sought Nepra’s endorsement for one of three proposed scenarios, each projecting net FCA recoveries ranging from Rs12.94 to Rs18.57 per unit. The approved FCA will be subject to modification based on Nepra’s final decision. As Nepra reviews KE’s multi-year tariff for 2024-2030, the utility requested provisional FCAs based on three scenarios, encompassing cumulative net FCAs of Rs12.94 per unit (FCA–Ref Interim Tariff–March 2023), Rs18.55 per unit (FCA–Ref Monthly Cost) and Rs16.9 per unit (FCA–Ref Yearly Avg Cost).

After presenting its case to the power regulator, customers, both in person and online, raised queries regarding various aspects of the provisional FCAs, their legality, the company’s inefficiencies and the pending clawback amounts.

One commentator from Karachi highlighted that all Nepra reports on the state of the industry indicate that K-Electric’s power is more expensive than CCPA (national grid) supplies. They questioned why consumers are paying capacity payments resulting from inefficiencies in the power sector and K-Electric’s operations. They also raised concerns over the disappearance of earthing on poles, leading to severe incidents of electrocution, particularly during the rainy season and the prolonged duration of loadshedding.

The scrutiny extends to K-Electric’s fuel choices, with queries raised over the utility’s reliance on expensive high-speed diesel (HSD) for power generation, prompting calls for a transition to cost-effective renewable energy sources.

In response to a public query, the regulator directed K-Electric to provide a written explanation for why the utility is generating power from its plants, including the 900 MW Bin Qasim Power Station 3 (BQPS-III) and the 248-MW Korangi Combined Cycle Power Plant (KCCPP), using expensive high-speed diesel (HSD). During the hearing, K-Electric’s CEO Moonis Alvi conveyed that the K-Electric Interconnection Agreement (ICA) with NTDC, encompassing the 500kV KKI interconnection and 220kV Dhabeji interconnection, has received approval from Nepra and is slated for completion by July 2024. This development is anticipated to enable the acquisition of up to 2,800 MW from the national grid. Furthermore, in early January 2024, K-Electric finalised two agreements with the government aimed at formalising and ensuring a steadfast power supply from the National Grid to Karachi, up to the interconnection capacity. These agreements are the Tariff Differential Subsidy Agreement (TDA) and Power Purchase Agency Agreement (PPAA). Tanveer Bari of KCCI urged Nepra not to finalise the FCAs until Karachiites receive the previous payments of approximately Rs47 billion in clawbacks and nearly Rs28 billion industrial support package (incremental package). He suggested that for load management, the utility should implement loadshedding on a PMT-based model rather than a feeder-based.

In response to inquiries from the authority, KE officials stated that the company has contested both cases in a court of law and has obtained stay orders on them.

Commentators also criticised the company for loadshedding during crucial hours, particularly as matriculation and intermediate examinations are currently underway. Another participant queried why, despite the availability of economical options such as wind and solar energy, the utility is not transitioning to these sources. Instead, they questioned why the utility continues to generate costly power from other sources and sells it to consumers.

The CEO of K-Electric responded by stating that the company has obtained regulatory approval on Requests for Proposals (RFPs) for 640 MW renewable projects. The pre-qualification process of the involved parties has been concluded, and the company requested a one-month extension from Nepra to facilitate competitive bidding. A member of Nepra confirmed that the extension has been granted. Additionally, the CEO mentioned that within 1.5 to two years, these renewable projects will be integrated into the company’s power system.

Another commentator Rehan Javed from Karachi pleaded for understanding, stating that factories in Karachi have been reduced to mere storage facilities due to high power tariffs. He implored authorities not to impose unbearable burdens on them. Javed proposed staggering the previous nine-month FCAs (July-March 2024) over nine months to alleviate the financial strain. The Authority acknowledged this suggestion, expressing its intent to consider it to lessen the burden on the public.

Regarding inquiries about the government’s purported proposal to discourage or reduce tariffs on the metering, a member of Nepra remarked that technology cannot be halted by anyone. It is beyond anyone’s control. Regarding a question about solar installed capacity, an official informed the meeting that while off-grid solar capacity is not known, the on-grid net-metering capacity is approximately 2,000 MW. Meanwhile, K-Electric in a statement after the hearing said, “The expected impact of proposed FCA will be between Rs1.6 to Rs2 per month as compared to the average FCA of Rs2.89 applied to customers of other power distribution companies for the same period.”