Nepra’s decision on K-Electric tariff revision soon expected

KARACHI: The two-day hearing of a petition filed by K-Electric to the power regulator to revise upward electricity tariffs ended on Friday with the regulator expected to announce its decision later this month. 

K-Electric Limited (KEL), in its tariff petition, sought Rs16.23/kilowatt-hour (kWh) for seven years between 2016 and 2023.

In March, KEL filed a review petition against the decision of the National Electric Power Regulatory Authority (Nepra), which determined the utility’s multi-year tariff at Rs12.07/kWh, 22.5 percent down from the existing rate of Rs15.57/kWh. 

KEL is asking for a continuation of its performance-based tariffs, which were last determined in 2009.  The company said it would not be able to finance any future investments under the latest tariffs determined by Nepra.

Chinese Shanghai Electric Power Company, which expressed its interest to acquire the country’s only vertically integrated power company, expected a favorable decision related to tariffs.  

“But before the final result, there is a possibility that the company’s profitability will be affected by changes in the price, which puts the transaction at the risk of termination,” Shanghai Electric said in an announcement. “The company will keep track of the progress.”

Industry sources said the proposed sale of the entity to Shanghai Electric hinges on the tariff outcome. 

“This MYT (multiyear tariff) is the decisive factor, which would make the proposed transaction -- transfer of majority shares of K-Electric Limited to Shanghai Electric Power Company – a success or failure,” said a source.

“Besides depriving KE and its consumers of the positive impacts associated with Shanghai’s $9.0 billion capital expenditure plan, this could set a negative precedent in context of foreign investments coming into the country, and [also] damage investor confidence,” added the source.

K-Electric Limited, in an earlier notice to Pakistan Stock Exchange, said the utility sought the permission of the Securities and Exchange Commission to hold the company’s annual general meeting by August 31 after Nepra’s decision.

The Nepra’s hearing concluded amidst uproar and Nepra Chairman Tariq Sadozai abruptly left the hearing. 

“Our legal requirement is complete,” Sadozai said before leaving.

He attributed over-billing and bogus-billing to KEL’s lower recovery ratio.

On the first day of hearing, the representatives of Shanghai Electric could not explain its position due to the rumpus by the supporters of a political party, which opposes tariff upward revision.

Energy Department Sindh also opposed any upward modification in the determined tariff.

By contrast, civil society and small and medium industry praised the performance and corporate social responsibility acts of K-Electric. 

Officials of the Overseas Chambers of Commerce and Industry and Pakistan Business Council advocated a fair tariff regime for KEL to sustain its operations, execute investment plans aimed at meeting the growing demand.

Aamir Ghaziani, director finance and regulations at K-Electric Limited, reassured the utility’s commitment towards meeting the growing power demand and providing reliable and uninterrupted supply to its consumers for which a sustainable tariff would be essential.