K-Electric seeks Rs144b increase in capital expenditure

The National Electric Power Regulatory Authority (Nepra) has raised questions over the performance of K-Electric while conducting a hearing on the mid-term review of the company’s investment plan.

Initially, K-Electric had sought a tariff increase of Rs1.64 per unit and after adjustment it proposed a hike of Rs1.26 per unit.

K-Electric had requested for allowing an increase of Rs144 billion in its capital expenditure (capex) compared to expenditure of Rs299 billion allowed by Nepra - the power sector regulator.

Nepra conducted a public hearing in that regard on Wednesday. The objective of the mid-term review was to look at the investment made and planned by K-Electric.

There were many things that were not needed to be brought for discussion, Nepra noted. It said K-Electric was making claims about its better performance while on the ground “we can’t see it”.

“Had it made improvement, it should have been visible,” remarked Nepra chairman, adding that there contradiction in K-Electric’s claims and reality.

“We cannot allow investment to K-Electric on its claims. The company, under its mid-term investment plan, has achieved only 39% target and “now it is again asking for investment permission for Rs144 billion,” Nepra noted.

K-Electric Chief Financial Officer (CFO) Aamir Ghaziani said the power utility wanted to continue increased spending on electricity generation, transmission and distribution programmes.

Since 2016, he said, the rupee depreciation had caused a loss of Rs58 billion to K-Electric because the allowed interest rate was based on an exchange rate of Rs121 to a dollar compared to the actual exchange rate of Rs155 against the dollar.

He pointed to increased capex of Rs24 billion on interconnection facilities, which was not part of the original approved plan, adding that Rs43 billion had been spent on improving safety and reliability of electricity infrastructure since the rainfall in 2018-19.

The K-Electric CFO also pointed out that the number of feeders included in the annual preventive maintenance had been increased from 100 to 300.

“Overall efficiency of the power generation fleet has improved from 95% to 98% since 2016 while availability has improved from 81% to 91%,” he stressed.

Fuel efficiency benefit of Rs14 billion in power generation had been passed on to consumers and tripping on the transmission network had gone down by 56% since 2016, the CFO said.

He said 5,500 pole-mounted transformers (PMTs) had been added, taking the total to around 28,800 while another 3,500 PMTs were expected to be added by 2023.

According to the CFO, total electricity transmission capacity of K-Electric has increased to 9,916 mega-volt ampere (MVA) from 6,300 MVA in 2016. Some 670,000 customers have been added from 2016 to 2020 and an additional 1,400MW of electricity will be added through the national grid by 2023 with the construction of two new interconnection facilities.

Aggregate technical and commercial loss had been reduced from 68% to 25%, he said, adding that 93% of Karachi would be free from load-shedding by 2023 compared to 75% now and 6% before the company’s privatisation.

Published in The Express Tribune, September 16^th, 2020.

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