ISLAMABAD: The government has opposed the K-Electric’s (KE) request for an increase in the multi-year tariff while advising the National Electric Power Regulatory Authority (Nepra) to cut the utility’s rates instead, on Thursday.
“The inflated costs presented by the KE indicate a lack of consumer-focused planning,” said an official from the Power Division.
Terming the KE’s multi-year tariff proposal as an inflated and unjustified burden on Karachi’s power consumers, the government has suggested the utility supplier’s base tariff be reduced from Rs44.69 per unit to Rs34.87 per unit through a series of targeted cost adjustments.
“Our recommendations aim to introduce fairness and operational efficiency in the KE’s practices while providing much-needed relief to consumers,” added the official.
The move will reduce the burden on the federal government as each year, it pays hundreds of billions of rupees to subsidise the Karachiites and maintain a unified tariff, as the KE’s power generation from its plants is much more expensive than the rest of the country’s generation.
The KE’s tariff petition hinges on projections that the government claims are detached from ground realities. For instance, the utility assumes a compound annual growth rate (CAGR) of 2.9% in peak demand, despite reporting a 7.2% decline in electricity consumption during FY2023.
“Aligning capital expenditures (CAPEX) with realistic growth projections alone could save Rs0.30 per unit,” the Power Division argued.
The government also took aim at the KE’s methodology for calculating its return on equity (RoE). The KE currently uses US Dollar-based indexation, which exposes consumers to currency volatility. By linking RoE to PKR, the government estimates savings of Rs1.20 per unit.
