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ISLAMABAD: National Electric Power Regulatory Authority (Nepra) has increased Karachi Electric’s (KE’s) tariff by Rs 3.76 per unit for September 2021 under monthly Fuel Component Adjustment (FCA) mechanism across the board except lifeline consumers.

The increase will be shown separately in the consumers’ bills on the basis of units billed to the consumers in the respective month to which the adjustment pertains.

The increase will be reflected in the billing month December 2021. The total financial impact of FCA would be Rs5.5 billion. KE billed 1400Gwh in September 2021 excluding lifeline consumers.

On November 3, 2021, KE officials informed Nepra that their power generation is expensive as compared to power purchased from external sources, as K-Electric generates energy from old and inefficient plants.

However there is a need that these inefficient plants should be shut down. Power generation mix needs to be improved to reduce the tariffs, by shifting away from dollar pegged generation in favour of solar, wind and hydel generation. For instance, addition of KE’s 900MW RLNG-based BQPS-III, as well as, renewable energy is estimated to reduce the cost of electricity.

Consumers should not bear the burden of inefficiencies of Discos, imprudent energy policies, deplorable composition of energy mix and electricity thefts. The FCA should not be increased or if absolutely required, should be within Rs.1.0/kWh and in future K-Electric should be barred from passing cost impact of inefficient power plants.

The hearing was attended by CFO K-Electric along with his financial and technical team. K-Electric during the hearing submitted that at the time of submission of its FCA request, the Authority’s approved fuel rate of Discos for the month of September 2021 was not available, thereof, K-Electric used the last available rate in its workings.

K-Electric accordingly requested that the amount claimed on account of energy purchased from CPPA-G is subject to adjustment based on the FCA decision of the Authority in the matter of Discos for September 2021. K-Electric also submitted that major reason for high FCA for September 2021, is increase in fuel prices of RLNG, RFO and coal as compared to the reference month of June 2021.

The Authority noted that the Power purchase agreement was signed between NTDCL and K-Electric on January 26, 2010 for five years for sale/purchase of 650MW on basket rates. Subsequently, a decision was made by the Council of Common Interest (CCI) in its meeting held on November 08, 2012 with respect to the modalities for withdrawal of electric power from NTDCL by the Petitioner, wherein it was decided to reduce the supply of energy by 300MW from NTDCL to K-Electric.

However, the decision of the CCI has been impugned by way of suits/ petitions by K-Electric in the High Court of Sindh at Karachi. No new agreement has been signed between K-Electric and NTDCL till date; and K-Electric is continuing to draw energy from the National Grid, which at present is around 1100 MW.

The Authority observed that both KGTPS and SGTPS were not operated by K-Electric to their full capacities, and also less energy was withdrawn from efficient sources. Similarly, KCCPP was also operated on HSD.

The Authority also inquired from K-Electric regarding directions issued through a letter of September 16, 2021, for making necessary arrangements for provision of gas at the required pressure at SGTPS and KGTPS power plants within 30 days, and to ensure that efficient plants are optimally utilized in future.

K-Electric in response stated that it has engaged the Ministry of Energy, Petroleum Division and Power Division, and a meeting has also been held with SSGC, wherein it has been suggested that legacy issues be set aside and going forward, the issues of gas pressure be resolved. K-Electric further submitted that a joint meeting is also being proposed for all the stakeholders involving NEPRA.

K-Electric also filed a motion for leave for review against the Authority’s decision of September 02, 2020, which has not yet been decided; therefore, K-Electric used the heat rate of 8,497 BTU/kWh, as allowed in the MYT determination, while working out its current adjustments. The Authority; however, for the purpose of proposed adjustments has considered the heat rates, as approved in its decision of September 02, 2020. This has resulted in reduction in fuel cost claimed by K-Electric for KCCPP by around Rs.18 million, which has accordingly been adjusted while processing the instant monthly FCA of K-Electric. In case of any subsequent revision in heat rates of KCCP, on the basis of Review motion filed by K-Electric, the impact of the same would be adjusted in the subsequent tariff adjustments of K-Electric.

Regarding cost of energy purchased from CPPA-G during the month of September 2021, K-Electric has used the Authority’s approved rate of Discos for the month of August 2021 instead of September 2021. K-Electric during the hearing submitted that at the time of submission of FCA request by K-Electric, the Authority’s approved rate of Discos for the month of September 2021 was not available. K-Electric accordingly requested to consider the rate of September 2021, once it is approved by the Authority.

According to Nepra, while working out the instant FCA of K-Electric, rate approved by the Authority for Discos for September 2021 has been incorporated for the energy purchased by K-Electric from CPPA-G during September 2021. This has resulted in increase in total fuel cost by around Rs659.90 million.

During the analysis, the main reason for EMO violation was observed to be “Less drawl from NTDC/simultaneous operation of expensive plants”. It was observed the K-Electric had drawn lesser energy from NTDC during certain hours, without reducing generation from expensive plants connected to its network. Accordingly, the financial impact due to the EMO violation events with respect to lesser drawl from NTDC, wherein KE has failed to provide satisfactory response, amounts to Rs.19.14 million.

Regarding the financial impact due to underutilization of efficient plants on account of lower gas pressure, a letter was issued to KE on September 16, 2021, whereby, it was directed to resolve its gas pressure/ availability issues within thirty days. In response, K-Electric has informed that it is in the process of resolving the lower gas pressure issue; however, there are certain meetings with stakeholders that will take place in due course of time. Furthermore, K-Electric also requested that Nepra may also be a part of the meeting with stakeholders for resolution of its low gas pressure issue.

The Authority has decided that K-Electric may be granted time till its meetings with stakeholders before the amount on account of lesser generation due to low gas pressure is withheld from its claim. Accordingly, for the purpose of FCA of September 2021, an amount of Rs. 19.14 million has been withheld from the claim of K-Electric.

Copyright Business Recorder, 2021

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