NEPRA Approves Tariff Hike for K-Electric

The National Electric Power Regulatory Authority (NEPRA) has sanctioned a tariff increase of Rs 3 per unit for K-Electric (KE) under the Fuel Charges Adjustment (FCA) mechanism, aiming to recover an additional Rs 6.105 billion for July 2024. This hike will be reflected in customer bills in December 2024.

In its FCA request for September 2024, KE urged NEPRA to resolve outstanding decisions from July and August 2024. During a public hearing on August 29, 2024, KE explained that its electricity generation costs are higher than those of the Central Power Purchasing Agency-Guaranteed (CPPA-G). This disparity is attributed to the absence of nuclear and hydro power plants in KE’s energy mix and its limited access to domestic gas for power generation, which results in elevated generation costs compared to the CPPA-G basket.

To address these costs, KE is implementing a strategy to rationalize its energy expenses. The company has issued Requests for Proposals (RFPs) for 640 MW of renewable energy, having already completed the bidding process for 150 MW of solar projects at Winder Bela. The Bid Evaluation Report for this project has been submitted to NEPRA, while bidding for the remaining projects is ongoing.

Additionally, KE is working to enhance its interconnection capacity with the national grid. The KKI and Dhabeji interconnections are anticipated to be energized soon, with the Dhabeji interconnection already activated. KE is also exploring options to source power from the Jamshoro Coal Power Project following its transition to local coal.

NEPRA acknowledged that power supply from Independent Power Producers (IPPs) linked to the National Transmission and Dispatch Company (NTDC) network may encounter challenges due to technical and legal issues related to interconnections and Power Purchase Agreements (PPAs). This concern was raised in response to comments from Arif Bilwani regarding the inefficient operation of BQPS-I units, whose licenses expired in August 2024. KE has requested NEPRA to extend the operational life of these units by three years until a new coal plant is expected to become operational by FY 2027.

KE stressed the necessity of retaining these units to ensure reliable power generation, particularly during potential outages and fuel shortages. Operating BQPS-I units would help mitigate dependence on more costly High-Speed Diesel (HSD).

Before its FCA petition for May 2024, KE had been claiming costs for part load adjustments and startup charges. NEPRA has been approving these requests based on the mechanisms established in the Multi-Year Tariff (MYT) for FY 2017 to FY 2023. Beginning in May 2024, KE has sought to recover fuel costs based on parameters set in its MYT for FY 2017-2023. Future adjustments resulting from revised parameters under the new MYT for FY 2024 to FY 2030 will be considered in subsequent adjustments once the new MYT is approved.

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