Karachi leadership proposes Power Division-KE-Nepra talks
Karachi's leadership proposes a tripartite session to resolve disputes over K-Electric's substantial claims, consumer burden, and ongoing litigation, with government bodies questioning the validity of billions in adjustments.
- K-Electric's multi-billion rupee end-of-term adjustment claims.
- Government and consumer opposition to K-Electric's claims.
- Proposed tripartite session to resolve K-Electric disputes.
ISLAMABAD: Karachi’s industrial and political leadership on Tuesday proposed a tripartite session involving the Power Division, K-Electric (KE), and the National Electric Power Regulatory Authority (NEPRA) to resolve long-standing disputes, including prolonged litigation, inconsistent financial burden on consumers, and approval of what they termed “judicious claims.”
The proposal came during a public hearing on KE’s End of Term Adjustment (EoTA) under its Multi-Year Tariff (MYT) for FY2017–2023, along with tax pass-through and other adjustments. The federal government has reportedly sought a “surgery” of claims exceeding Rs100 billion.
KE has sought an EoTA of Rs43.6 billion under its MYT determination. The major components include Rs23.4 billion on account of working capital costs, Rs11.05 billion due to exchange rate impact on return on equity, and Rs10.4 billion related to adjustments in working capital requirements.
However, Rs1.3 billion has been deducted for investments not incurred.
READ MORE: Nepra to hold public hearing today: KCCI opposes KE’s Rs59bn EOTA claims for FY2017-23
In addition, KE has requested Rs15.3 billion under tax pass-through and other adjustments. This includes Rs7.5 billion for taxes paid in 2023, Rs3 billion as additional tax liability for 2022, and Rs4.1 billion related to minimum tax for the period 2018–2021. Smaller claims include Rs461 million under WWF/WPPF pass-through and Rs261 million in pending adjustments related to power purchases.
During the hearing, KE’s Senior Director Finance, Ayaz Jaffar Ahmed, stated that as per Para 26.19 of the MYT determination dated July 5, 2018, the Authority had acknowledged the utility’s need for a reasonable level of working capital on outstanding receivables unless written off. Accordingly, KE was allowed to retain Late Payment Surcharge (LPS) to cover working capital costs. However, he argued that the actual cost during the control period significantly exceeded the retained LPS, which is now being claimed through the EoTA.
KE further stated that write-off claims for MYT 2017–2023, approved in June 2025, have yet to be recovered through the Schedule of Tariff (SoT). Therefore, working capital costs arising from non-recovery, amounting to Rs43 billion, should also be allowed under the EoTA in line with the regulatory mechanism. It is assumed that these write-offs will be recovered by December 2027, and working capital costs have been calculated accordingly.
MQM MNA Syed Hafeezuddin said that thousands of cases related to KE’s claims, including clawback, are pending in courts. He termed taxation on subsidy amounts as illogical and said Karachi’s consumers are suffering, necessitating discussion at the National Assembly level.
He emphasized the need for mediation to resolve disputes between consumers and the utility. “With the new administration in place, there is hope for a middle ground. NEPRA should act in the public interest,” he said, adding that industry closures due to high energy costs also require urgent attention.
Hafeezuddin further alleged that KE had failed to fulfill past commitments, including those related to the incremental package and clawback, and was seeking substantial claims without offering relief to consumers.
Additional Secretary Power Division Mehfooz Bhatti informed the hearing that the Power Division has submitted detailed comments on KE’s EoTA claims and expressed the hope that NEPRA would incorporate these while finalizing its determination, particularly regarding exchange rate adjustments on allowed return on equity.
He said the Power Division has requested that KE’s exchange rate differential claims be rationalized and revisited, including returns already allowed during the 2022 mid-term review.
Bhatti added that a detailed analysis of BQPS-III and un-incurred investments indicates a possible over-recovery of Rs26.5 billion in return on rate base (RoRB), and there is also a need to examine potential duplication in Interest During Construction (IDC).
The Power Division has also pointed out a Rs36 billion discrepancy in O&M expenses and excess recovery in RoRB, stating that the fiscal burden of project delays has been passed on to consumers, with an estimated financial impact of Rs200 billion.
He further noted that KE has not provided fresh justification for Rs48 billion in doubtful debts, an issue that had been settled in 2016. Any reassessment, he warned, would impose an additional burden on consumers. He added that working capital costs also need downward adjustment.
NEPRA’s Member (Tariff and Finance) appreciated the Power Division for presenting its comments during the hearing, unlike past practice where submissions were made after the determination. Rehan Javed of FPCCI stated that only substantiated and evidence-backed claims should be allowed. He supported the proposal for a tripartite mechanism involving the Power Division, KE, and NEPRA to ensure a balanced outcome for both consumers and the utility.
He added that uncertainty surrounding KE is discouraging new investment in Karachi.
Arif Bilwani also supported the idea of a tripartite mechanism, alleging that KE has submitted inflated claims worth billions. “We used to hear about ghost schools; now we are seeing ghost claims in KE,” he remarked.
Copyright Business Recorder, 2026
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