ISLAMABAD: National Electric Power Regulatory Authority (NEPRA) is expected to allow Karachi Electric (KE) to increase its tariff by over Rs 3 per unit for September 2021 under monthly Fuel Cost Adjustment (FCA) mechanism.
The power utility has sought positive adjustment of Rs3.454 per unit in tariff for September under FCA mechanism to recover Rs6.639 billion, but NEPRA’s tariff wing and Monitoring and Enforcement (M&E) wing have proposed deductions of Rs1.282 billion due to different variations and violations of Economic Merit Order (EMO). The public hearing was officiated by Chairman NEPRA, Tauseef. H. Farooqi, Vice Chairman, Rafique Shaikh, Member, Balochistan, Rehmatullah Baloch and Member KP, Anwar Maqsood Khan.
According to KE, out of total variation of Rs6.639 billion, Rs52 million was on account of mixed variance, whereas Rs6.639 billion was due to price variance. The impact of mixed variance was Rs0.027 per unit while price variance was Rs3.427 per unit.
KE’s Director Finance Ayaz Jaffar stated that the main reason for the substantial positive adjustment in FCA is exorbitant prices of furnace oil and RLNG. He said furnace oil price has posted a growth of 27 per cent, RLNG 61 per cent, CPPA-G sale price 16 per cent, HSD 1 per cent and coal 17 per cent against their reference for September 2021. KE sent out 1,921 GWh of which 903 GWh of its generation whereas 1,018 GWh was purchased from external sources. The total cost of sent out units has been calculated at Rs 27.573 billion, of which the cost of KE’s own generation was Rs 18.805 billion while cost of power purchase was Rs8.768 billion.
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During the hearing, consumers’ representatives and Karachi Chamber of Commerce and Industry (KCCI) raised questions on the performance of KE’s own power plants which are generating expensive electricity.
Though no representative from KCCI attended the hearing personally due to unpleasant situation in the previous hearings, it sent its submissions for consideration of the Authority.
KCCI raised the following points: (i) KE’s own generation is expensive as compared to power purchased from external resources; (ii) inefficient power plants be shut down and power generation mix has to be improved to reduce the tariffs; (iii) shifting away from dollar pegged generation in favour of solar, wind and hydel generation; (iv) FCA should not be increased or if absolutely required, should be within Rs 1.0/ Kwh; and (v) KE should be barred from passing cost of its inefficient power plants to consumers.
Representatives of consumers, Aneel Mumtaz, Arif Bilwani, Usman and Imran Shafiq criticised the performance of KE both with respect to provision of expensive electricity and service delivery. Chairman NEPRA also urged the power utility to focus on renewable energy which is far cheaper than other technologies.
Arif Bilwani queried why KE does not shut down its own expensive plants and purchases electricity from nearby efficient plants which require very small investment.
Chief Financial Officer (CFO) KE, Aamir Ghaziani stated that the power utility is working on renewable energy resources due to their lower cost, adding that in the past the cost of wind and solar was also on the higher side.
Copyright Business Recorder, 2021