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Nepra assailed over ‘windfall profits’ of KE

KARACHI: The Ministry of Water and Power has taken the National Electric and Power Regulatory Authority (Nepra) to task over its negligence which caused K-Electric consumers to pay an additional amount to the tune of Rs62 billion.

The ministry has estimated roughly that with the help of excessive tariff setting, the KE consumers have been made to pay at least Rs60bn extra due to multi-year tariff and Rs2bn because of high generation cost allowed by Nepra to the utility company.

The secretary of the ministry, Mohammad Younus Dagha, in a letter addressed to Nepra chairman retired Brig Tariq Saddozai drew his attention to the fact that the objectives which Nepra was expected to achieve included amongst others, a responsibility towards the consumers to pay a reasonable price for services which covered reasonable costs of the service providers. In recent revelations, the secretary said, it was noted with concern that the KE consumers had been made to pay a very high tariff resulting in windfall profits for the power utility.

Ministry wants extra amounts returned to consumers

However, by a strange tariff setting method, the tariff mechanism applicable to KE limits tariff reduction on account of reduced Transmission and Dispatch (T&D) loss benchmark only on “the change in cost of generation” rather than “the total cost of generation,” hence limiting the benefit to KE consumers of the reduced T&D benchmark and effectively allowing the KE higher T&D losses than the state benchmark.


This showed that while the declared T&D losses allowed to KE were 15 per cent but effective losses allowed came to around 28.5pc which was 4.8 percentage points higher than even its actual T&D loss at 23.7pc. This had provided a windfall for KE of Rs12.91bn in just 2015. The secretary observed that under the law it was supposed to be passed on to KE consumers. Since the practice of high T&D losses had been going on for past several years, the estimated cumulative loss to KE consumers added up to more than Rs60bn on this account.

Mr Dagha noted that now it had become evident as to how in all these years of falling oil prices, KE consumers were denied the benefit in fuel price adjustments.

Another area of such flaws in KE tariff calculations, he said, was cost of generation allowed to KE for its own generating units. While Nepra has been very strict with state-owned power generating units which were, many a time, even not allowed their actual cost of generation, the KE had been allowed to recover very high price against its actual generation costs which were much lower.

Mr Dagha advised Nepra to remove the anomalies and transfer these excessive payments back to KE consumers.

About TAUQEER RIAZ Utmanzai (2059 Articles)
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