Nepra cuts KE tariff to Rs32/unit in major blow to utility

ISLAMABAD: In a major blow to K-Electric’s financials, the National Electric Power Regulatory Authority (Nepra) has slashed the utility’s multi-year base tariff from Rs39.97 per unit to Rs32 per unit after reviewing the government’s petition on its earlier determination.

However, the power regulator upheld its earlier stance on key issues, rejecting the petition’s request to disallow K-Electric’s Rs50 billion write-off claims. Nepra noted that it had already approved the write-off in an earlier decision and saw no reason to reverse that determination. It

“The Petitioners have failed to convince the Authority to bring desired alteration or review, thus, the review motions are accordingly dismissed,” Nepra said in its decision. The tariff revision marks a sharp reversal from Nepra’s May 27, 2025 determination, which had raised KE’s average base tariff by Rs6.15 per unit—an 18.18 percent increase—to Rs39.97 per unit for FY2023-24. The July 18, 2025 notification had formalized the long-delayed multi-year tariff for supply, distribution, and transmission operations through FY2030.

The Power Division had challenged these decisions, and had filed a review petition before Nepra which recently held closed-door hearings on the petitions. Despite these approvals, K-Electric’s financial outlook remains bleak. The company’s bill recovery rate fell to 91.5 percent in FY2023–24 and is projected to drop further to 90.5 percent next year—potentially resulting in under-recoveries of nearly Rs97 billion over two years. Nepra has already warned that KE’s allowed Rs21.6 billion return on distribution operations could be wiped out without government support or tariff adjustments.

As per the latest decision, the regulator also set new efficiency benchmarks for the seven-year control period, approving a transmission loss target of 0.75 percent annually—down from 0.86 percent in FY2023–24—with an upper ceiling of 1 percent. Tariff adjustments will reflect annual performance, rewarding improved efficiency.

For distribution, Nepra approved a total loss target of 9 percent—comprising 8 percent technical losses and 1 percent allowance for law and order issues, based on the PITCO Fitchner study. This is expected to decline gradually to 8.03 percent by FY2029–30, with technical losses shrinking to 7.03 percent.

The existing 75:25 sharing mechanism for over-performance will remain in place—meaning 75 percent of any efficiency gains will benefit consumers, while KE will retain 25 percent as an incentive.

Nepra also reaffirmed its decision to use Pakistan’s National Consumer Price Index (N-CPI) for fuel cost indexation instead of the U.S. CPI, aligning tariff adjustments with domestic inflation trends to improve transparency and consistency.