ARTICLE: There was a hue and cry in Karachi over the expected notification for an increase in the electricity tariff. In December 2019, the National Electric Power Regulatory Authority (NEPRA) approved a PKR 4.88 increase in the tariff for the consumers of Karachi on account of some unclaimed fuel price variations, power purchase cost and other adjustments which NEPRA claimed justified the surge in fuel price. While this is yet to be implemented - the people of Karachi have been up in arms, alleging that that they pay more for electricity than the rest of the country. This is more perception than the truth.
Let us understand the above assertion in greater details. According to an analysis, Karachi consumers have been paying less per unit of electricity than the rest of the country since July 2019. K-Electric's tariff was delayed since 2016 and was finally notified in May 2019, which became a major cause for delays in the said adjustments. According to media reports, the PKR 4.87 increase could be broken up into two parts, by passing on the tariff increase of PKR 1.09 to PKR 2.89 per unit to consumers in different categories to bring the KE tariff at par with other power distribution companies, and the remaining to be taken up in tariff differential claim or prospective tariff adjustment.
Another interesting aspect, regarding Karachi's tariff is that it is still not at par with the rest of the DISCOs. According to industry experts, there are several reasons cited for the above disparity, including the fear of political blow-back. This is only a temporary situation and if the tariff is not checked in a timely manner it will mean that now Karachi consumers will face a double whammy of a higher tariff and economic instability caused by COVID-19, leading to a heightened chance of economic problems, defaults. As experts fear that these decisions were not made in a timely manner before and now the government faces a much difficult task at hand.
The courts too have been addressing many trivial issues such as the above by trying to strike a balance between regulator's powers, public interest, and economic consideration of the players in the power supply chain including DISCOS and so on. Cases like LESCO vs NEPRA, Flying Cement others vs Federation of Pakistan, Flying Board others vs government of Pakistan and others which have helped resolve many issues all point towards certain actions which befall upon NEPRA and must be adhered and not to be left unresolved.
Experts argue that Tariff determinations should be conclusive. Past examples have led to believe that incomplete steps affect different stakeholders. When previous governments froze electricity prices instead of implementing recommendations from NEPRA, it resulted in huge backlog and losses to power companies and burdened the consumers. Karachi consumers will inevitably have to accept the increase so that the tariff can be brought at par with the rest of the country, as per the uniform tariff policy. Meanwhile, the delay is simply adding burden to the National Exchequer in the form of Tariff Differential Claims. Moreover, the delay in the payment of fuel cost adjustment and other costs to KE is putting a strain on the utility's ability to invest in the city's power needs. The sooner all stakeholders including the government and the people understand this, the better.
(The author is a lawyer by profession with LLM from the Cranfield University UK, and an MBA from the Lahore University of Management Sciences, Lahore. He can be reached at [email protected], and tweets @hyshah1)
Copyright Business Recorder, 2020