Public hearing on KE’s FCA, QTA: Nepra’s public hearing marred by exchange of unpleasant remarks

ISLAMABAD: National Electric Power Regulatory Authority (Nepra) Chairman Tauseef H Farooqi and Karachi-based representatives of business community Thursday exchanged angry words during a public hearing on Karachi Electric’s Fuel Component Adjustment (FCA) and Quarterly Tariff Adjustment (QTA).

KE, in its request has sought an increase of Rs 0.555 per unit in tariff for the month of July 2021 under FCA mechanism, with a financial impact calculated at Rs 1.091 billion.

According to the KE request, in July 2021, negative variation of Rs 1.558 billion @ Rs 0.782 per unit was recorded due to mix variance. The positive variance of Rs 2.649 billion @ Rs 1.347 per unit was noted during the same month. The difference of both variations of Rs 1.091 billion @ Rs 0.555 will be passed on to the consumers because RLNG and furnace oil prices have increased by 28 per cent and 11 per cent in July 21 as compared to June 2021.

The power utility further stated that increased availability of gas (as compared to the reference) resulted in lower consumption of furnace oil.

The power utility has sought an increase of Rs 0.712 per under for the quarter April-June 2021 under QTA. In addition, it has also requested gross write-off of Rs 15.9 billion for the FY 2021. The authority was informed that with some adjustments, the increase will be Rs 0.2 instead of Rs 0.712 per unit. KE has also adjusted Rs 0.20 per unit, due to higher transmission losses over and above Nepra’s benchmark.

The public hearing was initially presided over by Vice Chairman/ Member Tariff, Rafique Ahmad Shaikh, along with Member Balochistan Rehmatullah Baloch and Member KP, Engineer Maqsood Anwar Khan. However, later on Chairman Nepra also joined the meeting and conducted the hearing. KE team was headed by its CFO, Aamir Ghaziani.

Nepra framed the following additional questions: (i) whether the requested fuel price variations are justified; (ii) whether the requested quarterly variations are justified; (iii) whether the KE has followed the merit order for its power plants as well as purchases from external sources; and (iv) whether there should be any amendments in terms and conditions of tariff (for supply of electric power to consumers by supply licencees) keeping in view the changes in consumer service manual?

Nepra’s officials of Enforcement and Monitoring (E&M) informed the Authority that KE deviated from Economic Merit Order (EMO) in operation of some of its power plants in July. The power utility also did not operate efficient power plants at full capacity. Korangi Combined Cycle plants operated on diesel instead of gas.

The cumulative cost of deviation from EMO, has been calculated at Rs 0.51 per unit, which implies that the power utility deserves only Rs 0.4 per unit.

Responding to the observations of E&M section of Nepra, Aamir Ghaziani, CFO KE apprised the Authority that Korangi Combined Cycle plant was operated on diesel due to issues in gas pressure. He said, it is the responsibility of SSGC to improve its infrastructure.

He further contended that power plants were operated as per the EMO of Nepra, adding that there is no deviation from it.

During the hearing, representatives of business community and public, Zubair Motiwala, Arif Bilwani, Usman and Aneel Musarrat raised a number of questions on the performance of KE’s power plants, cost of generation and services delivery.

All the interveners were unanimous in saying that KE should not be allowed any increase in tariff under the garb of FCA and QTA as the power utility is operating inefficient power plants, whose burden is being passed on to the consumers.

Arif Bilwani, who is getting electricity for his industry at the rate of Cents 9 per unit, maintained that power plants of KE are inefficient whose cost is being recovered from consumers. He opposed passing of positive impact of FCA or QTA to the consumers.

Arif Bilwani, another business community representative also criticised the performance of power utility and higher generation cost of KE’s own power plants.

When Chairman Nepra asked Arif Bilwani to cut short his arguments, exchange of angry words began between them, after which, Chairman directed his team to cut off Bilwani’s the connection.

During the hearing, one of the interveners also accused Nepra of extending undue favour to KE, whose service is pathetic. He argued that no one is protecting the consumers, adding that when shortfall in generation is being met through load shedding, then there is no justification for adjustment in FCA and operating expensive power plants.

At this the Chairman enquired if he was suggesting that Nepra should ban KE from producing electricity? The intervener argued that it is the responsibility of KE to generation cheaper electricity, adding let the power utility bleed.

At this both Chairman Nepra and the intervener exchanged unpleasant words due to which a silence was witnessed amongst all the participants including those on video link.

Exchange of angry words continued between Chairman Nepra and the intervener, Zubair Motiwala who expressed annoyance at the Chairman for blocking Arif Bilawani’s video link.

“Mr. Chairman, Karachi Chamber of Commerce and Industry strongly protests at your behaviour with Arif Bilwani. We are going to the press against you,” said Motiwala. He accused Nepra of not allowing consumers to speak during the public hearing.

Reacting to the comments of Motiwala, Chairman Nepra, Farooqi challenged him to go to the press against him, adding that if interveners will not respect the electricity court, then it is their choice adding “If you want to gang up against Nepra then you are most welcome. If you think that the electricity court should take a biased decision due to your influence, then let me tell you that such a thing will not happen. We will do what we should do independently.”

Chairman Nepra maintained that public hearing does not mean the interveners start criticizing the regulator. After hearing the arguments of KE and comments of interveners, Nepra reserved its decision, which will be announced later.

Copyright Business Recorder, 2021