Nepra likely to cut power tariff for KE consumers

Karachi residents may see a reduction in electricity prices, with a proposed cut of 27 paisa per unit currently under consideration.

The National Electric Power Regulatory Authority (NEPRA) is scheduled to hold a hearing today regarding a request from K-Electric for a fuel adjustment based on October’s fuel costs.

If the adjustment is approved, it could provide Rs 460 million in relief to consumers in Karachi, helping to ease their financial burden. However, this potential reduction comes after a recent increase in electricity prices.

On December 11, the federal government raised electricity prices nationwide by 20 paisa per unit. This increase, applicable to all electricity consumers, will place an additional burden of Rs 11.87 billion on electricity users.

The increase is part of the first quarterly adjustment for the current financial year.

NEPRA’s notification clarified that the price hike will not apply to lifeline or prepaid users, or those covered under the winter package. The new adjustment will be valid for the month of December 2024.

The previous quarterly adjustment of Rs 1.74 per unit, which expired in November, had already added to the financial strain for consumers.

KE seeks NEPRA nod for Rs68b write-offs

K-Electric's plea for Rs68 billion in write-off claims dominated a recent hearing convened by the National Electric Power Regulatory Authority (Nepra), highlighting the financial hurdles and operational complexities of managing Karachi's power supply. The claims span multiple fiscal years under the utility's Multi-Year Tariff (MYT) framework, underscoring challenges unique to the city's socio-economic landscape, according to a statement issued Tuesday.

The write-offs stem from Nepra's 2018 decision, which introduced a mechanism for recovery loss provisions. The utility reported Rs119 billion in bad debts in its audited accounts but sought Nepra's approval for Rs68 billion, citing rigorous internal and external verifications.

A focal point of the hearing was whether write-offs from FY2016, under a prior MYT regime, could be considered in the current tariff period. KE argued that these claims represent legacy liabilities rather than current receivables and maintained that Nepra's guidelines do not restrict claims to specific fiscal years. KE CEO Moonis Alvi called for policy consistency to ensure fairness, the statement noted.

Nepra scrutinised KE's recovery efforts, including disconnection drives, external agency engagements, and instalment payment schemes. While KE's recovery rate peaked at 95.4% in FY2022, macroeconomic instability and tariff hikes have since undermined these gains. Illegal reconnections and the city's dense socio-economic fabric continue to pose significant recovery challenges.

KE assured regulators that its claims exclude double-dipping, explaining that doubtful debt provisions were not factored into its operations and maintenance (O&M) costs under the MYT framework. The utility explained that the claims strictly pertain to unrecovered billed amounts verified through exhaustive procedures.

The enduring issue of illegal "hook" connections in unauthorised settlements also emerged during discussions. KE stated it had reduced hook connections from 4% to 0.2% but admitted that certain areas remain problematic due to a lack of regulatory enforcement. The utility clarified that write-offs relate exclusively to billed amounts and not to unbilled energy theft, which it handles separately.

Nepra officials raised concerns over verification mechanisms to avoid duplication and pressed for clarity on KE's disconnection and recovery policies. KE outlined its theft deterrence measures, such as aerial bundled cables, and defended its approach by citing international regulatory practices, which often allow similar provisions for utilities operating in complex urban environments.

Stakeholders expressed mixed opinions during the hearing. Some warned against passing write-off burdens onto consumers already facing steep electricity tariffs. Others advocated for a transparent and consistent regulatory framework to address legacy financial issues.