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ISLAMABAD: National Electric Power Regulatory Authority (Nepra) on Tuesday assured full support to Karachi Electric (KE) in resolution of its “legitimate” issues with other entities with the caution that the regulator will not accept any excuse if provision of electricity is not ensured to consumers in summer.

This message was conveyed by Chairman Nepra, Tauseef.H.Farooqi to KE management at a public hearing held to consider KE’s request of Monthly Fuel Cost adjustments for the months June 2020 to December 2020 and Quarterly tariff variations for April 2020 to December 2020.

The KE team headed by its Chief Financial Officer (CFO) Aamir Ghaziani briefed the Authority on its tariff requests under monthly FCA and QTA. The net positive impact of FCA has been calculated at Paisa 24 per unit, while the impact of QTA would be tariff neutral.

These requests are in line with the mechanism given in KE’s Multi Year Tariff whereby changes in Fuel prices, generation and power purchase mix are passed through along with some other annual adjustments

Quarterly tariff variations include requests for April to June 2020 negative Rs 3.918/kWh, July to Sept 2020 Rs 1.929/kWh and Oct to Dec 2020 Rs 1.874/kWh

Negative adjustment in April to June 2020 is mainly attributable to lower fuel prices which dropped due to COVID-19, followed by gradual increase in 2nd half of the year. Furnace oil prices dropped from Rs 57,000/M ton in March 2020 to as low as Rs 35,000/M ton in May 2020 and then increased to Rs 55,000/M ton during July to December 2020.

Similarly, RLNG prices dropped from Rs 1,800/MMBTU in March 2020 to Rs 1,040/MMBTU in June 2020, and increased to Rs 1,300/MMBTU in December 2020.

With GoP’s policy of uniform consumer tariff across the country, these variations are not likely to impact on consumers.

KE will be able to file its Tariff Differential Claims of Rs 39 billion (July 2020 to March 2021) after determination/ variations are approved by the regulator. Monthly FCA requests for June 2020 to Dec 2020 amount to Rs 3.9 billion, out of which Rs 3.2 billion or Paisa 33 per unit will be passed on to consumers and the remaining will become part of quarterly adjustments as per the given mechanism for T&D losses and not passing of negative FCA to certain consumer categories.

Increase in FCA amounts mainly relate to GIDC being billed by SSGC (impact around Rs 2.9 billion) as well as increase in fuel prices after COVID-19 period and higher proportion of RLNG being billed due to non-availability of natural gas.

KE’s FCA requests for July 2019 to May 2020 are already pending with Nepra, amounting to negative Rs 1.5 billion, for which a decision is expected shortly.

If an amount of Rs 1.5 billion negative FCA for July 2019 to May 2020 is deducted from Rs 3.9 billion FCA for June 2020 to December 2020, the net positive impact will be Rs 1.7 billion or Paisa 24 per unit on the consumers.

The Authority was briefed about the steps being taken by the KE to increase its generation capacity, improvement in transmission and distribution systems and other technical issues.

After hearing the views of CFO KE, the Chairman Nepra said, according to a careful estimate, 20.5 million to 20.75 million people live in Karachi and KE is directly connected to their lives and hopes, adding that the power utility must do whatever it can to provide them comfort.

"We are available to help the power utility wherever it needs us in contracts or other procedural issues with other entities but we will be very tough if previous mistakes are repeated in summer, this will not be acceptable. I am telling KE in February that if our brethren in Karachi again face the situation like in the past, it will not be tolerated," warned the Chairman Nepra.

The Authority discussed the merit order chart of KE in detail and raised several questions in this regard.

The Chairman Nerpa directed KE to ensure operation of its plants as per Economic Merit Order (EMO). However, Aamir Ghaziani, CFO KE, informed the Authority that the power utility strictly follows EMO, adding that expensive fuel is used only in case if allocated gas quota is not made available.

On a question, Ghaziani apprised the Authority that SSGC is not willing to sign Gas Supply Agreement (GSA) with KE, however, the gas utility wants an agreement on 'as and when available' basis.

The rate of SSGC is Rs 800 per MMBTU whereas RLNG's transmission tariff is Rs 1300 per MMBTU whereas distribution tariff is Rs 1600 per MMBTU. SSGC charges KE distribution tariff.

Minister for Energy Omar Ayub and Special Assistant to Prime Minister on Petroleum have already directed KE and SSGC to resolve issues, including receivables/payables.

Ghaziani said that when private suppliers will enter the market then KE will evaluate the purchase of RLNG from them. However, there is also discussion on enhancement of capacity of existing terminals.

In response to a question, he said KE is also considering establishing its own RLNG terminal but its minimum capacity is 600 MMCFD but KE's own demand is not 600 MMCFD.

He said, for summer, KE is doing a lot of work and will submit monthly progress reports to the regulator, adding that NTDC is working on Jamshoro transmission line's conductor; as it is completed, the existing transmission capacity of 650-700MW will increase upto 1100MW.

"This will be completed by the end of next month after which KE will start an additional power of 450 MW from the national grid," he added.

Out of 1400 MW, the remaining electricity will be available in 2022 and 2023, after energizing the Dhabeji grid and KKI grid stations.

In reply to a question, the Chairman Nepra said the purpose of Authority's visit to KE plant was to witness progress, because 450MW unit will make a huge difference.

"The briefing KE gave us shows that the 450MW unit is near completion. KE stated that there is a delay of 40 days. Some equipments are being airlifted. Consciously I am hopeful that KE's first unit of 450MW will commence generation by May 15, 2021," he added.

Zubbair Motiwala raised the issue of recovery of GIDC, saying that the industry especially zero rated units, will not pay as the power utility did not do its provisioning. Arif Bilwani said the power utility is not implementing the orders of the regulator. He further stated that the regulator did not approve one of its applications and now he wants to challenge it in the tribunal. The Representative of KCCI also raised concerns on electricity issues in Karachi.

The issue of net metering was raised by former MD Karachi Stock Exchange, Moin Fuda and Capt Mehsud. They contended that they are not getting the due benefit of net metering. However, CFO KE informed the Authority that the power utility is seeking an upward revision from Rs 9.95 to Rs 12.95 per unit, an increase of Rs 3 per unit.

The first unit of 900MW will be operational by May 15, 2021, from which 450MW will be added to the KE system.

Aamir Ghaziani said that to resolve issues of grid stations evident during rains are also being discussed with DHA and other authorities.

The hearing was also attended by Member Punjab, Saif Ullah Chattah, Member Sindh, Rafique Ahmad Shaikh Member KP, Engineer Bahadar Shah and Member Balochistan, Rehmatullah Baloch.

Copyright Business Recorder, 2021