KARACHI: K-Electric (KE) on Friday demanded supply of ‘cheaper’ indigenous natural gas instead of the ‘five time expensive’ RLNG from Sui Southern Gas Company Limited (SSGC) to run its power generation plants.
KE said that SSGC is currently supplying RLNG to KE instead of local gas which is ‘contempt’ of orders of the Sindh High Court (SHC). An immediate shift to indigenous gas will ease the burden on both KE and eventually on the customer.
In a letter to the Sindh Chief Minister Murad Ali Shah, the Chief Executive Officer (CEO) K-Electric Monis Abdullah Alvi has sought provincial government’s support to alleviate KE’s cash flow constraints as its net receivables due to Tariff Differential Subsidy Claims (TDS) have ballooned to Rs 25 billion.
It said KE has previously written on this matter to Power Division, Ministry of Energy, requesting for their support in releasing these payments on an urgent basis, as these funds are critical towards procurement of fuel from PSO and SSGC which power KE’s generation capacity. Compounding this matter is an increase in the base tariff due to the unavailability of indigenous Natural Gas to KE, which is being substituted by very expensive imported RLNG.
The prices of furnace oil have doubled within one year, while base tariffs continue to rise for utilities, consumer tariffs remain unchanged.
Resultantly, Tariff Differential Claims are projected to triple from current level of Rs 3 kWh to almost Rs 10-12/kwh. KE is unable to sustain this widening gap without settlement of dues.
These current conditions are severely hindering KE’s ability to pay SSGC. In case of non-payment, SSGC may disconnect supply resulting in a sharp curtailment of power generation by approximately 500MW.
This translates into incremental load shed of 5 hours across the city, and above the existing regime of 6 to 9 hours. This can have serious impact on economic and industrial activity, and potential to create a law and order situation in the city.
Currently SSGC is supplying RLNG to KE. This RLNG cost which is five time more expensive than local gas, is creating burden not only exchequer but will also result in exorbitantly high fuel adjustment costs per unit in coming months.
This in itself is a big challenge and unsustainable for everyone in the value chain be it power producers, businesses or residential customers. An immediate shift to indigenous gas will ease the burden on both KE and eventually on the customer.
For reference, Monthly Fuel Cost adjustment of April 2022 for KE customers is expected at around Rs 5 unit (subject to Nepra’s determination based on furnace oil (FO) price of Rs 138,582 per metric tonne and Gas RLNG purchased at PKR 3,131/mmbtu.
Copyright Business Recorder, 2022