The National Electric Power Regulatory Authority (NEPRA) approved an increase in K-power Electric’s rates of Rs 12.68 per unit under the quarterly tariff adjustment (QTA) program for the period of April to June FY2021-22, resulting in a net increase in revenue of about Rs 56 billion for the private utility based in Karachi.
Due to the government’s policy of uniform tariffs, under which the same electricity rates are imposed nationwide to customers of all distribution companies, including KE, the decision is unlikely to have an impact on consumers in Karachi.
However, in in order to keep standard rates for all distribution businesses, the federal government is expected to bear the increased financial burden through differential tariff subsidies paid out of the budget.
This was reaffirmed by the regulator in a?statement. The government “maintains a uniform tariff across the country as per practice, and normally the disparity is compensated by subsidies,” it stated.
For the fourth quarter (April to June) of FY 202122, the KE initially wanted QTA of Rs. 14.85 per unit, but then reduced it to Rs. 14.53. After a brief public hearing and data exchange on August 31, the regulator approved a 12.68 rupee per unit increase in QTA. The regulator claimed that roughly Rs 19 billion in write-off amounts for unrecoverable bills required more investigation and data reconciliation, which is why the authorization for lower QTA was granted.
The regulator stated that more thought was needed in light of the preliminary review of the disclosed consumer-wise information of write-offs and the answer provided by the KE’s auditors. As a result, the Rs 14.5 billion in write-offs that KE claimed, including the sum that was previously included in the price, had not been accounted for in QTA workings. The Rs 4.04 billion sum that was already included in the price had also been taken out. It stated that the regulator “would decide the matter properly.”
As a result of variations in fuel prices, generation mix, and volume, the impact of changes in the fuel component of the national grid’s power purchase price and the KE’s own generation fuel cost component is directly passed on to the consumers in the form of fuel charges adjustment in their monthly bills.
The regulator calculates the effects of these modifications depending on the intended units to be sold in the upcoming quarter and to be modified in the KE’s schedule of tariff. The actual payments made to IPPs on behalf of Workers Welfare Fund, Workers Participatory Provident Fund, etc. are made once a year in exchange for valid documentation proof.
The federal government has included these quarterly tariff modifications in the base rate due to PPP, capacity charges, variable operation and maintenance expenses, usage of system charges, and the impact of transmission and distribution losses.