ISLAMABAD -  The National Electric Power Regulatory Authority (Nepra) has reviewed the integrated multi-year tariff of K-Electric Limited (KE) for the period of seven years (2016-2023) and increased its base tariff by Rs0.70 per unit.

At present, the end consumer tariff of K-Electric is Rs12.07 per unit which has been raised by Nepra in the review petition to Rs12.7706 per unit effective from July 2016. Earlier this year, K-Electric had sought an increase of base tariff to Rs15.57 per unit, for ten years, for sustainability of the operation of the entity. However, Nepra had turned down this request and raised to Rs12.07 per unit, for seven years, in its decision in March 2017.Then, K-Electric had filed a review petition to increase tariff and after conducting hearing, Nepra had raised the tariff to Rs12.77 per unit. The period for the Multi Year Tariff shall be of seven years applicable from July 01, 2016 till June 30, 2023.

Under uniform tariff policy, the end consumer will be maintained at Rs12.77 per unit for consumers of Karachi. K-Electric will have to absorb increase which would hit on its profitability or the government would have to give subsidy to adjust increase. In its decision, power regulator said that K-Electric shall arrange heat rate tests by an Independent Engineer within a period of six months from the date of notification of the instant tariff determination. The selection process and appointment of an independent engineer shall be approved by Nepra, whereas, the tests shall be conducted in the presence of Nepra professionals as observers. The adjustment in heat rates will be made based on the results of the performance (Heat Rate) test.

K-Electric has not been allowed any provision on account of the doubtful debts in the tariff, however, bad Debts written off @1.69 percent of K-Electric’s assessed sales revenue has been allowed in the base case. For the purpose of actual write offs in future, K-Electric shall complete the set procedures by the regulator.

The connection has to be permanently disconnected for more than three years and due process of law to recover the outstanding dues as arrears of Land Revenue has been followed. In case where ownership of a premises is disputed, K-Electric shall certify that it has made best efforts to recover the outstanding amount but the amount is not recoverable, than it will be considered for write offs.

The amount to be written off shall be duly approved by the Board of Directors (BOD) of K-Electric. The write offs will be considered by the authority by ensuring the amount recommended for write offs has not been taken by K-Electric in any other way. K-Electric has not been allowed the impact of Revaluation on its Regulatory Assets Base while working out the depreciation charges and Return on Rate Base.

Other Income, excluding the impact of Late Payment charges (LPC), Interest on Bank Deposits and Meter Rent, has been deducted from the base case assessment. K-Electric shall pay interest earned on security deposits to the consumers through electricity bills. K-Electric is directed to stop charging of meter rent in future from those consumers who pay their cost of meter. K-Electric has been allowed a total investment of Rs298,915 million for the seven years tariff control period for its generation, transmission and distribution systems.

A midterm review to the extent of allowed Investments only shall be carried out, after completion of four years of the tariff control period, and in case of under investment and performance by K-Electric, the base rate adjustment component may be adjusted, keeping in view the amount of investment allowed vis a vis actual investment made by K-Electric during the period, after thorough analysis and review by the authority.

The authority has also allowed transmission and distribution losses in tariff control period. In first year, K-Electric has been allowed 20.90 percent, 19.80 percent in second year, 18.75 percent in third year, 17.76 percent in fourth year, 16.80 percent in fifth year, 15.95 percent in sixth year and 15.36 percent in seventh year.

The federal government base rate for the entire country is Rs11.45 per unit; therefore, it was paying subsidies for the K-Electric consumers which will be further increased after the Nepra decision.