ISLAMABAD: National Electric Power Regulatory Authority is reportedly working towards establishing a single system operator with a unified basket for the entire country, and Karachi Electric’s integration into this framework is expected to materialize within 1-2 years, well-informed sources told Business Recorder.
This was disclosed by the Power Division at a recent meeting of the Economic Coordination Committee (ECC) of the Cabinet during discussion on applicability of uniform Fuel Charges Adjustment (FCA) across the country.
Power Division clarified that Karachi Electric is entitled to 1,000 MW firm capacity from the National Grid, with any additional drawl allowed on a pro-rata basis. It was informed that KE’s off-take recently increased to around 1,600 MW, constituting more than 65% of its generation basket.
Uniform FCA: ECC unimpressed by Nepra’s viewpoint
It was further explained that in order to ensure uniform tariffs in line with National Electricity Policy and to address anomalies between Karachi Electric and other consumers across the country, the proposals in para 5 had been submitted for approval. The Finance Division endorsed the proposal with the recommendation to review it after one year.
Earlier, briefing the forum, Power Division stated that the National Electricity Policy, 2021 had been approved by the Council of Common Interests, provided, under Clause 5.6, that in due course, financial self-sustainability would eliminate the need for government subsidies (except for any subsidies for lifeline, industry, or agriculture consumers, as per prevailing government considerations). It further stated that in view of various parameters, including (a) the socio-economic objectives; (b) budgetary targets in field; and (c) recommendations of the Regulator with respect to consumer-end tariff for each state-owned distribution company, the Government had continued to propose a uniform tariff across the consumers and regions. In pursuance thereto, the Regulator shall, in consumers’ interest, determine a uniform tariff (inclusive of quarterly adjustments) for all the state-owned distribution companies. Additionally, the Government had maintained a uniform consumer-end tariff for K-Electric and state-owned distribution companies (even after privatisation) through incorporation of direct/indirect subsidies.
Power Division shared with the forum that the Government had maintained uniform consumer-end rates to the extent of base tariff and Quarterly Tariff Adjustments across the country. However, the mechanism of charging Fuel Charges Adjustment (FCA) was currently not uniform for D1SCOs and K-Electric. Accordingly, pursuant to the provisions of Section 31(7) of the Regulation of Generation, Transmission and Distribution of Electric Power Act 1997 read with the mechanism/formula determined by the Authority in the tariff determinations for DISCOs and K-Electric, different Fuel Charges Adjustment had been charged to the consumers of DISCOs and K-Electric in the past.
Power Division further informed the ECC that due to higher fuel cost reference setting in K-Electric determinations, the above difference had been subsidized by the Government in the form of subsidy.
The process could have been streamlined if the FCA determined for XWDISCOs had also been charged to the consumers of K-Electric to maintain uniform tariff across the country and the difference between the FCA determined by NEPRA for DISCOs and K-Electric had been adjusted by the Government against subsidy claims of K- Electric.
The Ministry further informed that section 31 of the Regulation of Generation, Transmission and Distribution of Electric Power Act 1997 (the Act) stated that “the Authority shall, in the determination, modification or revision of rates, charges and terms and conditions for the provision of electric power services, be guided by the national electricity policy, the national electricity plan and such guidelines as may be issued by the Federal Government in order to give effect to the national electricity policy and national electricity plan” and “the Authority, in the determination, modification or revision of rates, charges and terms and conditions for the provision of electric power services shall keep in view the economic and social policy objectives of the Federal Government”.
Accordingly, Power Division requested approval of ECC to issue following guidelines to NEPRA: (i) In order to maintain uniform tariff across the country, NEPRA shall determine application of Fuel Charges Adjustments (FCAs) of DISCOs on KE consumers by way of tariff rationalization;(ii) NEPRA shall determine the same tariff rationalization for K-Electric consumers as determined for DISCOs consumers, with same application period, keeping in view financial sustainability of the sector and uniform tariff policy of the Federal Government;(iii) any difference between the monthly Fuel Charges Adjustment rate determined for K-Electric and notified Fuel Charges Adjustment be made available to K-Electric by way of subsidy or cross-subsidy; and (iv) the uniform Fuel Charges Adjustment application shall start from DISCOs Fuel Charges Adjustment month of June 2025 to be charged in billing month of August 2025.
Power Division further apprised the forum that the summary was circulated to Finance Division and National Electric Power Regulatory Authority for comments.
Finance Division had supported the proposals with the stipulation that there would be no financial implication on the part of Government of Pakistan and in future if Karachi Electric’s Fuel Charges Adjustment impact became positive and higher than the DISCOs Fuel Charges Adjustment determination, the said proposal might be reconsidered.
Further, National Electric Power Regulatory Authority, in its comments stated that Fuel Charges Adjustment for Karachi Electric and DISCOs continued to be independently determined based on their respective fleet cost data and generation mix, to preserve regulatory transparency and compliance with cost-reflectivity principles.
Copyright Business Recorder, 2025
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