KE comes under fire for prolonged power cuts

Power utility seeks an increase in tariff by Rs1.26 per unit

ISLAMABAD:

The K-Electric (KE) came under fire for the second day of public hearing for prolonged power outages in Karachi.

The power utility had sought an increase in tariff by Rs1.26 per unit on account of demanding an additional investment of Rs114 billion.

Interveners from Karachi criticised the KE for carrying out load-shedding and asked why the license of power supplier had not been cancelled despite its “poor” performance.

They questioned how a company with 9.5% efficiency rate was asking for an additional investment.

During the public hearing, which was held on Thursday, Nepra directed the authorities concerned to submit details of contractors engaged with the KE.

Nepra chairman noted that it was their duty to ask for details of expenditures and that K-Electric was responsible for the delay in installing a 900MW power plant.

“If it is proved that KE is involved in a delay in installing power plants, Nepra would not allow including the delaying cost in tariff,” Nepra chairman said.

The Nepra chief wondered how the tariff would be reduced if Ogra allowed an additional cost of Rs114 billion and advised the KE to submit a detailed reply in this regard.

The power regulatory authority’s head maintained that 0.6 million people in Karachi had been facing load-shedding up to nine hours to which, the KE CFO replied that the demand of electricity was 3220MW against a supply of 2800MW.

The KE official emphasised that additional investments were critical to meet KE’s service obligations, including bridging the power demand-supply gap and strengthen the network, and thus were in public interest.

The KE officials observed that in addition to the impact of rupee devaluation from PKR 121/USD to PKR 155/USD, there had been added costs resulting from adjustments to the approved investment plan because of changing operational dynamics as well as increasing working capital requirements and financing costs on account of burgeoning government outstanding, all of which were beyond the control of the power utility.

They said the company had invested around Rs29 billion over and above Nepra had allowed in the Generation and Distribution (excluding G&T projects), which resulted in significant improvements in generation fleet reliability and availability, including efficiency improvements passed on to consumers along with significant improvements at consumer level that included reduction in load-shedding, with over 75% of the feeders being LS exempt.

With regard to future investments, the KE officials apprised the regulator that the utility was pushing ahead with the 900MW RLNG-based BQPS-III and that additional 1,400MW of electricity would also be added from the national grid by 2023 with the construction of two new interconnection facilities.

This would enable the power utility to make 93% of Karachi free from load-shedding by the year 2023.

“Further, the power utility is committed to invest an additional Rs46 billion towards improving safety and reliability of its distribution network,” one of the KE officials said.

“However, timely regulatory approval of these investments is very critical for execution of these plans,” the official added.