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ISLAMABAD: National Electric Power Regulatory Authority (Nepra) has determined KE’s quarterly tariffs of four quarters starting from April 2019 to March 2020 applicable for the period July-19 to June-20, financial impact of which will be nil, as the approved cumulative increase of Rs 2.939 per unit would be adjusted in the Tariff Differential Subsidy (TDS) of the power utility.

Quarterly variations allowed by Nepra for the quarter April to June 2019 is Re 0.736/kWh, July to September 2019 Rs 1.97/kWh, October to December 2019 negative Re 0.02/kWh and January to March 2020 Re 0.61/kWh.

The determinations are in accordance with the mechanism given in KE’s Multi Year Tariff (MYT) whereby changes in fuel prices, generation and power purchase mix are passed through along with certain annual adjustments.

With GoP’s policy of uniform consumer tariff across the country, these variations will not impact on consumers and will be included in TDS by GoP.

K-Electric had also claimed actual write-offs amounting to Rs4.051 billion (gross) for the FY2018-19, including GST deposited, based on billing amounting to over Rs500 million.

The net amount claimed by K-Electric after accounting for the recovery made through the write-off component built in the MYT 2017 is Rs1.056 billion. The amount of write-offs recovered through tariff for the FY 2018-19, i.e., Rs2.994 billion has been worked out by K-Electric by multiplying the write-off component of Re 0.207/kWh built in the MYT 2017 with the units billed during FY 2018- 19 (based on Nepra allowed T&D loss target).

The Authority noted that as per the workings submitted by K-Electric for the FY 2017, FY 2018 and FY 2019, it has reported nil amounts to be clawed back for all the three years. The claw-back workings submitted by K-Electric are being analyzed and based on the analysis, if any amount works out to be deducted on account of claw-back, it would be adjusted in the subsequent tariff adjustments of K-Electric or a separate decision in this regard would be issued.

K-Electric is allowed to charge the "use of system charges" from the user of its system, as per the mechanism provided in its MYT 2017 determination. The use of system charges shall be worked out by using the latest allowed numbers of transmission or distribution margin components or both, as the case may be, and shall be adjusted on the allowed level of loss assessment for the respective year.

Nepra’s latest determination regarding K-Electric’s Tariff Fuel Cost Adjustment (FCA) and Tariff Differential (TDF) claims amount to an additional subsidy of Rs 80 billion. This amount is for 12 calendar months and while it has been determined by Nepra, it has still not been notified by the Government of Pakistan.

This payment, which is due to K-Electric is in addition to the more than Rs 130 billion in past TDF claims that have been notified and are pending for several years.

These pending payments have put a strain on the power utility’s cash flow, forcing it to resort to increased borrowing. This caused KE’s finance cost to rise by 165% from 2019 to 2020, and is the key reason for plunging the company into a loss of Rs 3 billion for FY 2020, compared to a profit of Rs 17 billion in FY 2019.

It has to be kept in mind that this is money that the power utility has already spent, in order to ensure that generation is maximized and the power infrastructure is maintained to keep the city of Karachi energized.

Copyright Business Recorder, 2021

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