ISLAMABAD: K-Electric has sought 76 percent (Rs 10.69 per unit) increase in its base tariff to Rs 44.69 per unit under Multi-Year Tariff (MYT) mechanism for seven years - FY 2023-24 to 2029-30 – from the existing base tariff of Rs 34 per unit.
According to tariff petition, adjustment has been sought in following components: (i) cost of power EPP component Rs 18.88 per unit; (ii) cost of power CPP component, Rs 12.54 per unit; (iii) transmission charges, Rs 3.48 per unit; (iv) distribution charge Rs 3.84 per unit; (v) O&M, Rs 0.42 per unit; (vi) retail margin, Rs 0.59 per unit; (vii) recovery loss allowance Rs 2.88 per unit; and (viii) working capital, Rs 2.07 per unit.
The National Electric Power Regulatory Authority (Nepra) has issued a notice inviting stakeholders to express their opinions within seven days.
KE seeks Rs2.9871/unit transmission tariff for next seven years
In the details shared by the KE to the Nepra for new supply tariff, the power utility company stated that based on expected sent out units for FY 2024, estimated generation mix, tariffs requested for KE plants for FY 2024 onwards and tariffs determined/agreements entered into for external sources, reference cost of power comes out as Rs 502.709 billion translating into Rs 26.94/kWh on per units served. With requested distribution losses, power purchase price (PPP) per unit billed comes out to Rs 31.41/kWh.
For the purpose of reference tariff, estimated units served for FY 2024 are 18,660 GWh and transmission charges amount to Rs 55.738 billion based on base tariff for transmission of Rs 2.99/kWh as requested in KE’s Transmission petition FY 2024—FY 2030. The same will be adjusted based on mechanism proposed in KE’s Transmission petition.
Distribution charges shall be passed through on the basis of units billed and tariff approved by the Nepra. For the purpose of reference tariff, estimated units billed for FY 2024 are 16,004 GWh and distribution charges amount to Rs 61.385 billion based on base tariff for Distribution of Rs 3.84/kWh as requested in KE’s Distribution petition FY 2024—FY 2030. The same will be adjusted based on mechanism proposed in KE’s Distribution petition.
For tariff calculation purposes, the KE has calculated O&M component (FY 2024 and onwards) by taking actual O&M amount of FY 2023 i.e. Rs 4.761 billion. The KE requests the Nepra to index this amount for onward years with actual CPI against the reference CPI of 227.96 as of May 2023 along with incorporating projected growth in units billed to cater for the increase in consumer base.
O&M cost for FY 2023 i.e. Rs 4.761 billion after indexation to May 2023 CPI and incorporation of projected growth in units billed for FY 2024, translates to Rs 6.758 billion. This amount has translated into Rs 0.4223/kWh based on projected units billed for FY 2024.
For revised reference year, the amount used to compute revenue requirement for FY 2025 (i.e. Rs 7.098 billion) will be indexed with CPI of May 2024 at the end of FY 2024 as per annual O&M indexation mechanism.
The power utility company has also sought a retail margin of 1.5% that shall be applied on total revenue requirement excluding retail margin, recovery loss and working capital which comes out to Rs 9.399 billion translating into Rs 0.5873/kWh.
Considering the reference revenue requirement and recovery loss target for FY 2024, amount of recovery loss comes to Rs 46.063 billion translating into Rs 2.8783/kWh for the year FY 2024, which would be adjusted based on actual consumer revenue including revenue from wheeling consumers and revised recovery loss targets for each year.
Considering the inputs for cost of working capital explained above, KE has forecast working capital cost to be Rs 33.119 billion based on projected revenue requirement and balances, translating into Rs 2.0695/kWh for FY 2024, which would be indexed quarterly using three months KIBOR +2% spread along with annual adjustment for changes in working capital requirements till FY 2030.
However, the KE argued that the requested amount in the supply tariff has no relation to the rates being charged in consumers’ bills. The rates on consumers’ bills will continue to be issued under the uniform tariff policy applied nationwide.
According to figures, the K-Electric’s base tariff amounted to approximately 34 rupees until FY 2023 when the last MYT was expired. The tariff requested in the petition is essential to maintain the sustainability of the business and the quality of service. Last year, other electricity distribution companies in the country also underwent the same process.
Copyright Business Recorder, 2024
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