NEPRA urged to undo cut in K-Electric’s multi-year tariff

Uproar during public hearing meant Chinese representatives were unable to speak

KARACHI: The power sector regulator heard several stakeholders of K-Electric on Thursday in a review petition filed by the firm to undo a notable cut in consumers’ tariff to support growth in power generation, transmission and distribution in the economic hub - Karachi.

Several people spoke against the proposed revision in the multi-year power tariff as well.

However, when a representative of China’s Shanghai Electric Power - the likely new management of the firm - came forward to express his views in the case, he was not allowed due to an angry outburst in the room by a group of people.



“The group of people, who were associated with a political party, did not allow Shanghai’s representative to build his case,” a meeting participant told The Express Tribune.

The National Electric power Regulatory Authority (Nepra) revised down the multi-year tariff for K-Electric (KE) consumers by Rs3.5 per unit in March 2017. The new tariff was announced for a seven-year term; 2016-2023. The cut in tariff was a negative for the firm, neutral for consumers and positive for the government, it was learnt.



Keeping this in view, later on, KE filed a review petition. Around the same time, representatives of Shanghai Electric Power (SEP), which has locked the KE acquisition deal at a price of $1.77 billion with Dubai’s Abraaj Group, approached Prime Minister Nawaz Sharif for review in the multi-year tariff.

Now, China’s state-owned power firm is a potential stakeholder of KE. It has recently expressed hope of winning a desired multi-year tariff from Nepra and reaffirmed its commitment to go ahead with the acquisition deal.



It, however, has also not ruled out the termination of the transaction in case it fails to win the desired tariff. The likely new management has disclosed to the government a $9 billion investment plan for the next 10 years.

Nepra Chairman Tarif Sadozai chaired the hearing. Among other officials present on the occasion were vice chairman, two members and officials representing a concerned committee.

KE representatives said on the first-day of the two-day hearing they should be provided a ‘stable’ tariff to go ahead with the development projects in the areas of power generation, transmission and distribution. They said that the power demand from KE consumers is going to double at 5,000 megawatts in the next 10 years and to pace up with the anticipated demand they need a stable tariff.

A press statement from KE added prominent businessmen, renowned professionals, civil society and philanthropists actively participated at the hearing.

Speaking on the occasion, Omar Lodhi, Partner & Head of Asia, Abraaj Group said in the statement, “the determined tariff 2017 does not cover the costs and ignores genuine recovery issues, leading KE into serious cash flow shortfalls, putting the sustainability of the company at risk and would result in serious implications for KE and its consumers.”

Earlier, the performance-based tariff structure enabled K-Electric to invest over Rs130 billion in the power infrastructure of Karachi since 2009. KE has to-date not paid out any dividend and the profits declared in annual audited accounts have been re-invested into the business. This in turn has benefited customers through improvement in supply and quality of service, he said.

Published in The Express Tribune, July 14^th, 2017.

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