Nepra faces backlash over K-Electric’s ageing plants

ISLAMABAD: The participants from Karachi sharply criticised the National Electric Power Regulatory Authority (Nepra) during a public hearing on Thursday, accusing the regulator of neglecting K-Electric’s outdated power infrastructure.

They argued that Nepra has failed to compel K-Electric to upgrade its inefficient, four-decade-old power plants, which produce expensive electricity and lead to higher costs for consumers and multi-billion rupees of government subsidies to maintain uniform tariffs.

“No one has checked the heat rate of K-Electric’s plants, which are generating expensive power,” one participant said. “In the end, Karachi consumers pay for these inefficiencies in their bills.”

The hearing was held to consider K-Electric’s petition to charge an additional Rs3.09 per unit in electricity bills for December. This adjustment is related to July 2024’s monthly fuel charges adjustment (FCA). Nepra has reserved its decision on the matter.

An industry observer noted that obtaining a net-metering licence from K-Electric can take up to three months, compared to just three to four weeks with other distribution companies (Discos). “Industries, despite being shut down, still face hefty utility bills due to fixed charges,” he said.

K-Electric CEO Moonis Alvi, who has been leading the company since June 2018, said K-Electric had received the lowest bid of Rs11.2 per unit for a renewable energy project and had submitted the necessary documents to Nepra for approval. Additionally, he said that a 150-kilometer transmission line requires Nepra’s approval. The contractor has estimated it will take about two and a half months to complete it, but K-Electric has asked to complete it in 20 months.

“We request the authority to approve the project and the transmission line,” Alvi said. “If both are approved, we will be able to transmit electricity as soon as the project is completed. Otherwise, if the renewable project is completed before the transmission line, the company may face penalties.”

However, attendees expressed skepticism over K-Electric’s claim of securing the lowest bid, citing the continual decrease in solar prices. “Is this not still high? The authority should investigate,” they argued.

An industrial commentator from Karachi questioned whether Nepra had adequately inspected K-Electric’s transmission system and generation capacity. “K-Electric has not utilised 853MW capacity in July,” he said.

Concerns were also raised about the lack of transparency in K-Electric’s operations, including undisclosed contractual values for furnace oil consumption and unaccounted disposal of slag, a by-product of power generation. “Where does the slag go? Why aren’t its prices factored into tariffs to benefit consumers? Who is selling it? A thorough investigation is needed,” said Aneel, a resident of Karachi.

Despite the widespread concerns expressed during the hearing, Nepra did not provide a response. Imran Shahid of Jamaat-e-Islami criticised the high costs of power generation at K-Electric and blamed poor governance by the Power Division, Nepra and K-Electric for negatively impacting consumers.

K-Electric’s ageing power plants, which have exceeded their expected operational lifespan, are at the center of the controversy. The company has requested a five-year extension for these plants, a move, participants say, would be a major injustice to Karachi consumers.

The 886-kilometer Matiari to Lahore HVDC transmission line also came under fire for being faulty and failing to transmit the required capacity. “There is over 5,000 MW in the southern region, and if the government can’t transmit it to the north, it should be diverted to Karachi,” a participant urged. “We should get rid of K-Electric. Don’t punish Karachi consumers for K-Electric’s shortcomings.”

Nepra Chairman Waseem Mukhtar explained that power producers have Power Purchase Agreements (PPA) with the Central Power Purchasing Agency (CPPA), making it legally challenging to divert power to K-Electric without the producers’ consent.

Karachi-based entrepreneurs called for a halt on FCA rates at Rs1 per unit until Nepra finalises the base tariff. They warned that without this intervention, Karachi’s industries could suffer, as FCA rates for other Discos are negative while Karachi’s remain positive, creating discrepancies.

Mukhtar responded by stating that K-Electric’s positive FCA is based on the old tariff structure, while Discos’ FCA are negative due to the new base tariff. He added that K-Electric’s tariff is currently being finalised.