K-Electric proposes Rs0.27/unit FCA reduction for October

K-Electric (KE) customers may benefit from a Rs0.27 per unit reduction in electricity rates as part of the Fuel Charge Adjustment (FCA) for October 2024. 

This follows a similar Rs0.17 per unit reduction granted for September, providing some financial relief to residents of Karachi.

The National Electric Power Regulatory Authority (Nepra) conducted a public hearing on Thursday to evaluate KE’s FCA proposal. During the session, Nepra presented comparative data from the past three years, indicating that KE customers have generally paid lower FCA rates than those of other distribution companies (XWDISCOs).

KE representatives attributed the proposed reduction to declining international fuel prices and improved generation efficiency. They highlighted the company’s reliance on efficient RLNG-based plants, such as BQPS-2 and BQPS-3, while reducing reliance on furnace oil. 

Nepra officials acknowledged that in FY25, XWDISCOs have achieved lower FCA rates than KE so far.

For example, in 2022, KE’s FCA was Rs3.62 per unit, while XWDISCOs charged Rs4.41 per unit. In 2023, KE’s FCA was negative Rs2 per unit, compared to XWDISCOs’ positive Rs0.90 per unit. In 2024, XWDISCOs charged Rs2.92 per unit, while KE’s adjustment was Rs1.37 per unit.

Concerns were raised during the hearing about KE’s power generation efficiency and adherence to the Economic Merit Order (EMO), which prioritises cost-effective electricity production. KE officials stated that compliance reports on the EMO are regularly submitted and reviewed.

Another significant issue discussed was KE’s pending Multi-Year Tariff (MYT), which lapsed in 2023. FCA adjustments are currently being processed on a provisional basis using older reference prices. Nepra officials suggested that the MYT’s eventual approval would allow KE to better align with XWDISCOs through updated pricing mechanisms.

Last week, Nepra announced a Rs1.14 per unit negative FCA adjustment for XWDISCOs for October 2024, to be reflected in December bills. However, lifeline users, domestic consumers using up to 300 units, agricultural customers, prepaid electricity users, and Electric Vehicle Charging Stations (EVCS) are excluded from this adjustment.

Nepra has reserved its decision on KE’s FCA petition and will finalise the matter after completing its review. The regulatory authority’s decision will determine whether KE customers receive further reductions in their electricity bills, potentially providing some respite amid broader economic challenges.