KE consumers to see Rs0.27/unit cut

Fuel adjustments bring relief, but debates continue over cost and efficiency

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ISLAMABAD:

Consumers of K-Electric (KE) are set to benefit from a reduction of up to Rs0.27 per unit in electricity rates as part of the Fuel Charge Adjustment (FCA) for the month of October 2024. This relief follows a similar reduction of Rs0.17 per unit granted in September 2024, providing some financial ease to residents of Karachi.

The National Electric Power Regulatory Authority (Nepra) held a public hearing on Thursday to discuss KE's proposed FCA adjustment. During the session, Nepra member shared comparative data from the past three years, indicating that KE customers have generally paid lower FCA rates than those served by other power distribution companies, known as XWDISCOs.

KE had requested a Rs0.27 per unit reduction to be passed on to its customers in their bills for October 2024. The hearing sparked a heated discussion, with some commentators alleging that Karachi residents bear the brunt of "expensive" electricity due to inefficiencies and higher production costs. In response, Nepra officials presented data showing that, in recent years, KE customers have not faced the highest FCA charges nationwide.

For example, in 2022, KE's FCA was Rs3.62 per unit, while XWDISCOs charged Rs4.41 per unit. In 2023, KE's FCA was negative Rs2 per unit, compared to XWDISCOs, which charged a positive Rs0.90 per unit. In 2024, XWDISCOs charged Rs2.92 per unit, while KE's adjustment stood at Rs1.37 per unit. However, Nepra members acknowledged that so far in FY25, XWDISCOs have achieved lower FCA rates than KE.

At the hearing, Nepra officials and commentators raised concerns about KE's efficiency in power generation and adherence to the Economic Merit Order, which ensures cost-effective electricity production. KE representatives explained that their power generation strategy prioritised efficiency and low-cost resources. They noted that the company relied primarily on its RLNG-based BQPS-2 and BQPS-3 plants and had significantly cut back on the use of more expensive furnace oil.

KE officials further clarified that there was no significant change in the quantum of power drawn from the national grid compared to the reference month. They attributed the proposed FCA reduction to declining international fuel prices and improved generation efficiency. They also assured Nepra that compliance reports on the Economic Merit Order were regularly submitted for verification. Another issue discussed was KE's Multi-Year Tariff (MYT), which lapsed in 2023 and remains under regulatory review. Since MYT approval is pending, KE's FCA requests are being processed on a provisional basis using older reference prices. Nepra officials indicated that once the MYT is approved, it would enable KE to align more closely with XWDISCOs by incorporating updated reference pricing and mechanisms.

Last week, the regulatory authority announced a negative Rs1.14 per unit FCA adjustment for XWDISCOs for October 2024. This reduction will be reflected in customer bills for December 2024. However, certain customer categories, including lifeline users, domestic consumers utilising up to 300 units, Electric Vehicle Charging Stations (EVCS), agricultural customers, and prepaid electricity customers, will not be eligible for this adjustment. Nepra has reserved its decision on KE's petition and is expected to finalise the matter after completing the necessary processes.

The regulator's decision will determine whether KE customers can expect further reductions in their electricity bills, providing much-needed relief in the face of broader economic challenges.