NEPRA constitutes committee to probe Rs62bn loss to consumer by K-Electric


Taking cognisance of the matter, the National Electric Power Regulatory Authority (NEPRA) has constituted a committee to probe into alleged over-charging of Rs62billion by the K-Electric (KE) from its consumers and advised the committee to complete the investigation within a week.

Following the letter of water and power ministry to probe into Rs62billion colossal loss to K-Electric consumers, the NEPRA has constituted a three-member committee to look into the matter. The committee is comprised of the NEPRA consultant, Tariff advisor, and case official of the K-Electric.The authority has also instructed the concerned department to review the tariff of K-Electric, officials at the NEPRA told Pakistan Today.

On the other hand, the K-Electric, on Thursday, out rightly rejected claims of excessive collection and labelled these allegations as a wrong interpretation of the tariff mechanism. The utility has further stated that the consumers have been charged as per approved tariff without any anomaly. “There has been no violation of any tariff regulation and all monthly fuel price variations are passed on to the consumers as per the approved tariff mechanism. Additionally, over the period of last six years the transmission and distribution losses have been reduced from 36pc to 22pc,” the K-Electric said.

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Interestingly, power sector regulator NEPRA is in a fix. If it determines that overcharging was made by the K-Electric, then officials of NEPRA can face the music in the form of accountability and severe punishments. And, even if it (NEPRA) does not settle the matter then the government can file a reference in Federal Public Service Commission (FPSC) to get rid of the authority that is comprised of a chairman and four members. Moreover, the government can also ask any investigating body to investigate the matter in future. The National Accountability Bureau (NAB) can take up the matter for examination.

It is to note here that launch of an investigation against K-Electric at a time when Abraj Group is about to hand over major shares (18.33 billion) and the control of K-Electric to Shanghai Electric Power (SEP), a state-owned enterprise controlled by China’s State Power Investment Corporation at a deal of $1.77billion, might put the deal in doldrums and add a lot of worries to both parties (Abraj Group and Chinese firm SEP). Abraaj owns 66.4 per cent of K-Electric’s total shares along with management control.

The Ministry of Water and Power, in a recent letter to the NEPRA, has revealed that K-Electric has pocketed Rs62 billion from power consumers. The ministry has advised the authority to make an adjustment in the new tariff in order to pay the excessive amount back to the consumers. The ministry has also called for a strict accountability of those responsible for causing such a colossal loss to Karachi consumers.

According to an available copy of the letter, Water and Power Secretary Younus Dagha said rough estimates suggested that with the help of excessive tariff determination, K-Electric consumers had been made to pay Rs62 billion over the past few years. He described that the tariff determination practice adopted for K-Electric is a violation of the general policy and guidelines related to the tariff determination. He advised for setting up a new tariff for K-Electric and not only address the anomalies but also transfer the excessive collection back to the consumers.

The multi-year tariff, which the NEPRA sets for K-Electric, provides a mechanism whereby the tariff is adjusted every quarter to reflect the revised fuel and energy purchase costs, as well as targets for the transmission and distribution losses.

The calculation shows that K-Electric had been allowed higher transmission and distribution losses than the stated benchmark that were recovered from the consumers.

The secretary said it had become evident that the consumers were denied the benefit in fuel price adjustments. The windfall allowed to K-Electric on that account had been in billions of rupees every year through the multi-year tariff and quarterly adjustments determined by the NEPRA, he said.

The power ministry further said the figures showed that the declared losses allowed to the company stood at 15pc and the effective losses due to the tariff-setting mechanism allowed by such a calculation came to around 28.5pc higher than even its actual losses at 23.7%.

“This has roughly provided a windfall of Rs12.91 billion in the single financial year of 2015-16, which under the law was supposed to be passed on to the consumers.”

The practice had been going on for the past several years and the estimated accumulative loss to the consumers stood at more than Rs60 billion, it said.

Another flaw in the K-Electric tariff calculations is the cost of generation allowed to the company for its own generating units.

While the regulatory authority had been very strict with state-owned power generation units which were, many times, not allowed their actual generation cost, the K-Electric had been allowed to recover very high prices whereas actual generation costs were much lower, the ministry said. It added that the cumulative efficiency of K-Electric plants is around 40pc while the cost is calculated by the NEPRA at an efficiency of around 37pc allowing an estimated Rs2 billion last year.


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Ahmad Ahmadani
The author is a an investigative journalist at Profit. He can be reached at [email protected]
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