KE suffers hit as NEPRA slashes tariff

The National Electric Power Regulatory Authority (Nepra) on Monday slashed the K-Electric (KE) multi-year tariff by Rs7 per unit in response to a petition filed by the Power Division. The regulator also revised the losses target downward, which would further impact the company.

Nepra reviewed the government's petition against its earlier decision regarding KE's power tariff and reduced the multi-year tariff from the earlier determination of Rs39.97 per unit to Rs32 per unit, a major hit to the utility's financials.

However, no changes have been made in the take-or-pay decision, and the authority also dismissed the review motion of the petitioners in the matter of KE's Rs50 billion write-off claims. In its decision, the authority said: "The petitioners have failed to convince the Authority to bring the desired alteration or review; thus, the review motions are accordingly dismissed."

On July 18, 2025 Nepra issued its decision notification for long-delayed multi-year tariffs for supply, distribution, and transmission through 2030.

Earlier, on May 27, 2025, the power regulator had issued a decision raising the average base tariff for K-Electric by Rs6.15 per unit—an 18.18 percent increase—setting it at Rs39.97 per unit for fiscal year 2023–24 under a newly approved multi-year tariff regime stretching to FY2030.

Despite the formal tariff approval, KE's finances remain under severe pressure. With bill recovery slipping to 91.5 percent in FY2023–24 and projected to fall to 90.5 percent next year, the utility could face cumulative under-recoveries nearing Rs97 billion over two fiscal years.

Nepra cautioned that KE's permitted Rs21.6 billion return on distribution operations might be wiped out without government support or adjustments.

Now, Nepra's further cut of over Rs7.5 per unit may add to the company's financial strain.

Nepra also set new efficiency benchmarks for KE's seven-year investment plan. The regulator approved an annual transmission loss target of 0.75 percent for each year of the seven-year control period, starting from a reference level of 0.86 percent in FY2023–24.

The rate will be adjusted downward based on actual performance, with an upper ceiling of 1.0 percent for losses. The tariff will be recalibrated each year according to this benchmark, ensuring any gains from improved efficiency are reflected in future adjustments.

In addition to transmission losses, Nepra also approved a total distribution loss target of 9 percent for KE, which includes 8 percent technical losses and 1 percent allowance for law and order challenges, based on the PITCO Fitchner study. This benchmark accounts for real-world operational factors within KE's distribution network.

The authority's plan projects a gradual reduction in distribution losses from 9 percent in FY2023–24 to 8.03 percent by FY2029–30, indicating a targeted improvement of nearly one percentage point over the control period.

Within this, technical losses are expected to decline from 8 percent to 7.03 percent, while the law and order margin remains constant at 1 percent. The approved trajectory reflects Nepra's emphasis on long-term efficiency gains through infrastructure investment and loss reduction initiatives.