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September 18, 2020

Nepra asks KE to find alternatives to tariff hike for investment

Business

September 18, 2020

ISLAMABAD: The National Electric Power Regulatory Authority on Thursday sought details from K-Electric of its contractors, asking it to find fund avenues other than tariff hike for capital expenditures.

The Nepra grilled KE for prolonged power outages in the city and directed it to submit details of contractors engaged with the company during the final day of two-day public hearing in the matter of KE’s demand for increase in tariffs by Rs1.26 per unit.

The interveners alleged that KE was responsible for a delay in installing 900 megawatts of power plant. Interveners from Karachi strongly criticised KE for load shedding and questioned why licence of KE should not be cancelled despite reports of poor performance. They said how a company with 9.50 percent efficiency rate is asking for additional investment of Rs114 billion.

Nepra Chairman Tauseef Farooqi said if it is proved that KE is involved in a delay in installing power plants, the authority would not allow KE to include delaying cost in tariff.

Farooqi warned KE officials not to use strict word against the authority.

“How tariff would be reduced if Nepra allows additional cost of Rs114 billion,” he said. He asked KE to submit details reply in this regard. There are 0.6 million people in Karachi who were facing 9-hour load shedding.

KE authorities admitted that there was nine hours load shedding in Karachi.

KE Chief Financial Officer (CFO) Aamir Ghaziani said the additional investments are critical to meet KE’s service obligations, including bridging the power demand-supply gap and strengthening the network and are in public interest.

Ghaziani said demand of electricity stands at 3,220 megawatts as against supply of 2,800MW.

“In addition to the impact of rupee devaluation from Rs121/$ to Rs155/$, there have been added costs resulting from adjustments to the approved investment plan because of changing operational dynamics and increasing working capital requirements and financing costs on account of burgeoning government outstanding, all of which are beyond the control of the power utility,” he said.

KE officials informed Nepra that the company has invested around Rs29 billion over and above what Nepra allowed in the generation and distribution, which has resulted in significant improvements in generation fleet reliability and availability, including efficiency improvements passed on to consumers along with significant improvements at consumer level, which includes reduction in load-shedding with over 75 percent of the feeders exempted from load shedding. KE officials said the company is pushing ahead with 900MW regasified liquefied natural gas-based Bin Qasim Power Station-III. Additional 1,400MW of electricity would also be added from the grid by 2023 with the construction of two new interconnection facilities.

“This would enable the power utility to make 93 percent of Karachi free from load-shed by the year 2023,” said the official. “The power utility is committed to invest an additional Rs46 billion towards improving safety and reliability of its distribution network. However, timely regulatory approval of these investments is very critical for execution of these plans.”