ISLAMABAD: The National Electric Power Regulatory Authority (NEPRA) has announced K-Electric’s distribution and transmission tariffs for a seven-year period (FY 2023-24 to FY 2029-30) under the Multi-Year Tariff (MYT) regime. NEPRA has estimated a revenue requirement of Rs 50.284 billion for the distribution system for FY 2024-25, approving an average tariff increase of Rs 3.31 per unit.
The power utility company has also been allowed Use of System Charges (UoSC) revenue of Rs 43.447 billion for the FY 2023-24, its impact will also be around Rs 3.30 per unit and it can be changed when investment plan is approved.
These determinations will not affect the electricity rates charged to consumers, as these continue to be governed under the uniform tariff policy applicable across Pakistan.
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NEPRA held a public hearing on June 27, 2024, on the distribution tariff, attended by several interveners from Karachi and other areas.
K-Electric had requested a return on equity of 16 percent for its distribution segment, but NEPRA approved it at 14 percent, significantly lower than requested by K-Electric. Similarly, the return on equity for transmission was approved at 12 percent, down from KE’s requested 15 percent.
Regarding the seven-year tariff control period, KE explained that as a private entity, it secures financing without government guarantees. Lenders require cash flow projections over the assets’ life, which for KE exceeds the 7-year control period. KE’s long-term loans usually span 10-12 years, while asset life ranges from 10 to 30 years.
KE requested a tariff control period of seven years (FY 2024 to FY 2030), consistent with previous allowances and the approved investment plan for transmission and distribution (T&D). A sustainable long-term tariff is crucial for financing and equity investment, as lenders require clear revenue and profitability forecasts. A shorter control period would hinder KE’s ability to secure financing and assess project viability.
Copyright Business Recorder, 2025
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