Tariff woes force closure of industries
Industry representatives have urged the power-sector regulator to end uncertainty about K-Electric's (KE) adjustment claims as industrial units in Karachi are either shutting down or shifting out of the city.
The warning came at a public hearing conducted on Tuesday by the National Electric Power Regulatory Authority (Nepra) on end-of-term adjustments for KE's Multi-Year Tariff (MYT) spanning 2017 to 2023.
KE Senior Director Finance Ayaz Jaffer presented the company's position on the requested adjustments. Matters relating to working capital requirement, write-off claims, tax treatment and subsidies were discussed.
A key figure taken up at the hearing was the positive Rs28 billion working capital adjustment requirement up to 2023. KE demanded that the company be allowed a capital of Rs43 billion including write-off claims that had not been recovered so far.
The mechanisms for end-of-term adjustments had been incorporated and approved by Nepra in its MYT determination for the control period FY17-FY23 and the mid-term review, which envisaged the evaluation of specific components at the end of the control period through a prescribed regulatory mechanism.
At the hearing, KE apprised the authority that the cumulative end-of-term adjustment claim amounted to Rs43.6 billion including components relating to the impact of exchange rate variations on the permitted Return on Equity (RoE), investment-related adjustments and working capital actualisation based on actual balances versus projected benchmarks approved under the MYT framework.
The power utility said it had also sought approval of pass-through claims pertaining to taxes paid and claimed strictly in compliance with the MYT determination. KE maintained that all submitted claims were fully aligned with the provisions, methodologies and mechanisms already approved by Nepra.
Industry representatives complained that unresolved claims had wasted time and created uncertainty among Karachi's business community. A stakeholder warned that industries in the KE service area were either turning into warehouses or shifting out of the city.
Different stakeholders stressed the need for a balanced approach to protect consumers from cost burden while also ensuring KE's financial health was not damaged.
Rehan Javed, an intervener, highlighted that Karachi's industrial zones and export base were heavily dependent on the KE power supply. "Karachi depends on KE, which is a privatised entity, and their problems are different from DISCOs (distribution companies)," he said.
"The resolution of all issues warrants a visit to Islamabad. We don't want the financial strength of our sole supplier of electricity to be ruined; at the same time, we would not want consumers to pay unnecessary taxes. We need a balanced approach," argued Javed.
The previous MYT hearing was taking place in 2026 and investor confidence ought to be protected, stressed the interveners from Karachi. "How you treat KE today will determine the future of DISCOs' privatisation. No one is interested in investing," they said, adding "how we treat our investors will set the path for future investments".
"Whatever fair treatment in terms of finances is worked out in favour of KE, please give them their rightful share once and for all," they said.
Arif Bilwani, another intervener, questioned when would the people of Karachi get respite from such issues and cases?
"Our time is wasted in court matters, which otherwise should have been spent constructively for our industries," he contended and asked to allow KE to perform. "No DISCO or Genco will ever be privatised given the prevailing issues in the power sector," he added.
Tanveer Barry stressed that Karachi consumers were already paying a surcharge of Rs3.23 per unit, an additional burden that should not be borne by them.