K-Electric opposes Nepra’s decision for tariff cut

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K-Electric has said that it will sign a petition for review of National Electric Power Regulatory Authority’s (Nepra) decision of reducing the electricity tariff by Rs3.5 per unit on grounds that the tariff cut will not benefit the consumers. Nepra on Monday cut K-Electric’s multi-year power tariff by Rs3.5 per unit to an average of Rs12.07 per unit for the next seven years till 2023.

A K-Electric spokesperson has clarified that there is a separate power tariff that is applicable to end consumers. When inquired about why the decision to reduce the tariff had been taken, he stated K-Electric is filing a petition for review of NEPRA’s decision if the tariff cut is not benefitting the consumers.

A statement issued by K-Electric on Tuesday stated that the multi-year tariff deduction issued by Nepra discourages investment and does not favour long-term interest of consumers. The statement further added that the tariff determination decision is under review by K-Electric.

Furthermore, “the current determination includes no incentive to continue to invest in improving power supply to the people of Karachi and creates significant uncertainty around current and future projects – which will lead to widening the demand-supply gap,” the company added.

The decision is likely to result in cash flow problems for the company ultimately affecting K-Electric’s ability to continue smooth operations, it feared.

It is pertinent to mention that K-Electric’s performance had become worthwhile after incurring losses for 17 years due to significant investments made by the company supported by a performance-based tariff structure that gave a major boost to company operations. The company had been able to undertake major network up gradation work to enhance electricity generation and transmission and distribution network under the multi-year tariff model.

Moreover, the company was able to bring transmission and distribution losses down from 36% in 2009 to under 22% in 2016. This ensured that over 61% of Karachi consumers did not have to suffer from load-shedding and ensured smooth power supply to all industrial zones.

Hence, the new I-MYT (integrated multi-year tariff) threatens K-Electric’s business model and will largely derail the progress of the company.