Amid rising costs: Nepra faces backlash over KE license renewal

ISLAMABAD: Stakeholders criticized the National Electric Power Regulatory Authority (Nepra) during a public hearing Thursday regarding the recent renewal of generation license of the Karachi-based utility’s 40-year-old plants, which comes with a generation cost reaching Rs58.44 per unit. The controversial renewal also includes provisions for a take-or-pay clause and dollar indexation.

Shahid Imran, a representative of the Jamaat-e-Islami, Karachi chapter, condemned the hearing as a “fixed match” between NEPRA and KE, alleging that the regulator was merely rubber-stamping the power company’s demands. He asserted that NEPRA’s approval undermines consumer interests, allowing KE to continue generating the most expensive electricity for nearly two decades.

The hearing focused on KE’s petition for fuel charge adjustments for September, in which the company requested approval to pay back Rs0.16 per unit to consumers for overcharges incurred during the month. If approved, this measure would relieve consumers by Rs247 million.

NEPRA was informed that the cost of electricity sourced from the Central Power Purchasing Agency-Guaranteed (CPPA-G) was Rs8.57 per unit, while KE’s self-generated electricity averaged Rs23 per unit.

During the hearing, KE officials reported a six percent decrease in electricity demand for September, with industrial demand dropping by 12 per cent and residential demand by three per cent. The decline, they noted, was attributed to prevailing economic conditions. Imran criticized Nepra for supporting KE, stating that the authority’s decision to grant a seven-year license was an unwarranted reward for a company with ageing and costly power plants. He also denounced the continuation of the take-or-pay clause, urging NEPRA to rescind it. “The dollar indexation should also be withdrawn,” he demanded.

While acknowledging the dissenting note from NEPRA member Mathar Rana, who opposed the license renewal, Imran asserted that the remaining members were biased in favor of KE. He rejected the renewal outright and called for KE to source its electricity from the national grid, which he claimed is significantly cheaper.

NEPRA member Rafiq Shaikh responded to the criticism, suggesting that any objections to the tariff could be formally reviewed. Tanveer Bari, representing the Karachi Chamber of Commerce, echoed the concerns, stating that Karachi residents are subjected to higher electricity rates compared to the rest of the country. Bari highlighted that under the proposed monthly fuel charge adjustment for September, Karachiites would see only a Rs0.16/unit reduction, while other distribution companies (Discos) would benefit from larger adjustments.

Arif Balwani noted that the marginal reduction of Rs0.16 per unit from KE pales in comparison to the Rs0.71 decrease seen by other Discos. He questioned whether the small adjustment was truly reflective of the cheaper supply from the national grid. KE officials replied that various factors contributed to the pricing, including a decrease in furnace oil generation. Nepra has reserved its judgment on the matter and plans to release a decision following further scrutiny.