NEPRA drastically reduces K-Electric unit prices

NEPRA drastically reduces K-Electric unit prices
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ISLAMABAD: The National Electric Power Regulatory Authority on Monday determined integrated multi-year tariff for K-Electric for seven-year period (2016-23) and reduced its base tariff to Rs12.07/unit from existing Rs15.57 a unit, however the power utility has been bound to invest Rs238 billion on power generation, transmission and distribution projects.

The Authority has rebased the tariff and reduced it from existing Rs15.57 kW/h to Rs12.07 kW/h against the claim of KE for Rs16.23 kW/h. The Authority also did not cede to the request of KE to allow tariff for ten-year and decided that seven-year period is reasonable allowed tariff period to provide certainty to the utility to raise debt and invest.

To ensure transparency and objectivity and keeping in mind the comments of the interveners and commentators, tariff and cost has been segmented into three components of generation, distribution and transmission. In this regard, KE has been made bound to invest an amount of Rs237.6 billion; generation (Rs48.1billion), distribution (Rs69.4 billion), transmission (Rs115.7 billion) and others (Rs4.2 billion) over the control period of seven years. KE has been further made accountable and be subject to a midterm review to ensure that proposed investments have been carried out.

Similarly transmission and distribution (T&D) target losses have been reduced and target for FY 2016-17 has been fixed at 20.40 pc. The consumers have been given immediate benefit of reduction of 9.6pc losses from 30pc already built in the existing tariff. Further the consumer end tariff will now be adjusted with the yearly targeted T&D losses in accordance with provisions and adjustment mechanism framework provided in the determination. At the same time the Authority being mindful of the interest of the KE has ensured a reasonable return to KE on its existing asset base as well as adequate cash flows to carry out the proposed investments.

The Authority has disallowed KE from collecting bank collection charges from the consumers through monthly billing and has also directed the KE to pay interest on security deposits to the consumers through their bills. Moreover, KE has been restrained from charging meter rent from all the consumers whether existing or new.

KE is also directed to start billing immediately on time of use (TOU) rates to consumers having installed TOU meters. Further TOU meters should be provided to all existing consumers having sanctioned load of 5kW and more by December 31, 2017. In future, new consumers having the said sanctioned load of 5 kW or more the said meter shall be provided with TOU metering facility.

The new connection charges shall be determined by the Authority in separate proceedings and till then KE is directed to ensure that new connection charges levied to the prospective consumers are comparable with the other DISCOs.

KE is the only vertically integrated utility in Pakistan and is principally engaged in the generation, transmission and distribution of electrical energy to over 2.4 million consumers. The Authority allowed a multi-year tariff to KE in 2002. After privatisation of KE in 2005, multi-year tariff was set to expire in 2012. Consequently, on signing of amended implementation agreement by new management of KE with Ministry of Water and Power, KE filed a tariff petition in 2009 for certain amendments in tariff. While deciding on the proposed amendments, the Authority extended the multi-year tariff to next seven years till June 2016 in line with the tariff control period provided in the amended implementation agreement.

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