ISLAMABAD: National Electric Power Regulatory Authority (NEPRA) has approved an average base tariff of Rs39.97 per unit for K-Electric (KE) for the fiscal year 2023-24, under a newly sanctioned seven-year Multi-Year Tariff (MYT) regime that will remain in effect through FY 2029-30.
According to NEPRA’s determination, the approved tariff is structured to support KE’s Rs400 billion ($1.42 billion) investment plan and ensure long-term regulatory predictability. The tariff components include Rs31.96 per unit for power purchase (excluding transmission charges), Rs2.86 for transmission, Rs3.31 for distribution, Rs2.28 as supply margin, and a prior year adjustment of negative Rs0.44 per unit.
NEPRA stated that the MYT structure aims to provide financial viability for KE’s long-term infrastructure investment and system upgrades. The regulator acknowledged KE’s performance improvements since privatization, including a significant reduction in line losses and efforts to tackle illegal connections caused by unplanned urban growth.
KE reported that its post-privatization investments, totaling $700 million alongside reinvested profits, have driven over $4 billion in network modernization. The returns are benchmarked against dollar-based metrics similar to those applied to Independent Power Producers (IPPs) and HVDC transmission operators.
For FY 2023-24, KE’s total revenue requirement stands at Rs606.92 billion. Key financial components include Rs34.68 billion as the supply margin, Rs5.91 billion in operations and maintenance costs, and Rs36.25 billion as recovery losses. Other offsets include a negative Rs1.24 billion in working capital adjustments, Rs6.24 billion from other income, and a negative Rs6.69 billion from prior year adjustments—resulting in a final net margin of Rs34.68 billion.
The regulator took note of KE’s actual and projected recovery ratios—91.5% in FY 2023-24 and 90.5percent in FY 2024-25—which contributed to reported financial losses of Rs40 billion and Rs57 billion in the respective years. While the utility’s return on distribution has been estimated at Rs21.6 billion, NEPRA warned that without a recovery loss allowance, KE would incur losses in the initial MYT years, posing risks to its liquidity and operational stability.
To mitigate these risks, NEPRA approved a staggered recovery allowance, starting with 93.25pc for FY 2023-24 and increasing incrementally to 96.50% by FY 2029-30.
The approved MYT aims to ensure stable tariffs, incentivize operational efficiency, and enable forward-looking investment decisions for KE. NEPRA emphasized that the decision considers the practical lapse of FY 2023-24 and the near completion of FY 2024-25.
The determination now awaits formal notification in the official gazette. Under Section 31(7) of the NEPRA Act, if the federal government fails to notify the decision within 30 days, NEPRA is authorized to do so itself.
