ISLAMABAD: The Power Division, led by Federal Minister Sardar Awais Ahmad Khan Leghari, has found itself in a head-on confrontation with K-Electric management amid an ongoing dispute over the utility’s latest tariff determinations.
In an official statement issued on Monday, the Power Division said that National Electric Power Regulatory Authority (Nepra), in its recent review, issued a determination regarding K-Electric’s Multi-Year Tariff (MYT) adding that “certain elements are presenting this decision in a distorted and misleading manner, creating a false impression that it goes against the interests of Karachi’s consumers. The reality is exactly the opposite.”
A spokesperson for the Power Division stated that it was important to clarify key facts for the people of Karachi and the rest of the country to counter what the Ministry described as a “malicious campaign.”
PD welcomes Nepra’s KE MYT review decision
The spokesperson noted that K-Electric, being a private-sector utility is expected to perform better than public-sector distribution companies. However, when compared with public utilities such as IESCO, FESCO, or GEPCO, these state-run entities outperform KE in critical areas including recovery of dues, reduction of line losses, and quality of service.
According to the statement, Nepra’s review primarily addresses K-Electric’s administrative and operational performance. The company currently draws around 2,000 MW from the national grid—power that is cheaper than electricity generated by K-Electric’s own plants.
The spokesperson argued that consumers in Karachi already pay the same per-unit tariff as those elsewhere in Pakistan. “If K-Electric’s internal costs are rationalized and reduced, will that justify increasing the tariff for consumers—or help maintain uniform national rates? Is that not a positive outcome for the people of Karachi?” the statement asked.
The Power Division emphasized that K-Electric consumers, like all others, will continue to benefit from government subsidies under the uniform national tariff policy. However, these subsidies “will no longer be allowed to turn into profits for K-Electric due to inefficiency or failure to reduce losses. Preventing public subsidies from being converted into private gain,” the statement added, is a “national responsibility.”
Before the review, K-Electric could pass on unrecovered dues to the public, effectively turning its inefficiencies into a burden on taxpayers. Under the new framework, only receivables proven to be genuinely unrecoverable—despite all reasonable efforts—will be considered by Nepra. “K-Electric will no longer be able to arbitrarily include unverified amounts in the per-unit cost for Karachi consumers,” the spokesperson said.
The Ministry added that Nepra’s review also ensures K-Electric’s profits remain within reasonable limits. Previously, the company’s allowed return on invested capital ranged between 24% and 30%, linked to the US dollar. Under the revised structure, dollar indexation has been removed since KE’s assets are based in Pakistan and denominated in rupees. Moreover, the rate of return on K-Electric’s generation plants may be further reduced in line with the government’s renegotiation of power purchase agreements with independent power producers (IPPs).
The spokesperson cited findings by an independent consultant hired by K-Electric’s own board, which allowed up to 6.5% system losses to be passed on to consumers but also found that KE had failed to sufficiently reduce losses despite heavy expenditure. “In light of these findings, Nepra has moved to lower recognized loss levels—clearly an action in the public interest,” the statement said.
K-Electric’s increased reliance on the national grid, the Ministry added, should also help lower fuel costs. Furthermore, Nepra has excluded non-operational generation plants from the tariff structure to prevent capacity charges from idle assets being passed on to consumers—an approach the federal government has already implemented for its own power plants to reduce unnecessary costs.
The Power Division described Nepra’s review as a “landmark decision” for Pakistan’s regulatory framework, with long-term benefits including reduced fiscal pressure and stronger consumer protection. “Going forward, no entity will be able to extract unverified or unjustified profits from the public,” it stated.
The decision, the Ministry added, would ease the burden on taxpayers and incentivize K-Electric to cut losses rather than pass them on. “Previously, inefficiencies at K-Electric resulted in billions of rupees in subsidies funded by the national budget….This revised determination will help reduce that unnecessary fiscal drain.” Power Division stressed that the new tariff framework also eliminates the disparity between K-Electric and public-sector DISCOs. It said there is no risk of load-shedding in Karachi following the retirement of idle generation plants since cheaper power is available from the national grid and the transmission infrastructure is already in place.
Copyright Business Recorder, 2025
Comments
Comments are closed for this article.