Consumers of K-Electric (KE) are set to benefit from a reduction of up to Rs0.27 per unit in electricity rates as part of the Fuel Charge Adjustment (FCA) for October 2024. This follows a similar reduction of Rs0.17 per unit in September 2024, offering some financial relief to Karachi residents.
The National Electric Power Regulatory Authority (Nepra) held a public hearing on Thursday to review KE’s proposed FCA adjustment. During the session, a Nepra member presented comparative data from the past three years, showing that KE customers generally paid lower FCA rates than those served by other power distribution companies, known as XWDISCOs.
KE had requested a Rs0.27 per unit reduction to be passed on to its customers in their October 2024 bills. The hearing sparked a heated debate, with some commentators alleging that Karachi residents suffer from “expensive” electricity due to inefficiencies and higher production costs. In response, Nepra officials presented data indicating that, in recent years, KE customers have not faced the highest FCA charges nationwide.
For instance, in 2022, KE’s FCA was Rs3.62 per unit, while XWDISCOs charged Rs4.41 per unit. In 2023, KE’s FCA was negative Rs2 per unit, compared to XWDISCOs, which charged a positive Rs0.90 per unit. In 2024, XWDISCOs charged Rs2.92 per unit, while KE’s adjustment stood at Rs1.37 per unit. However, Nepra members acknowledged that so far in FY25, XWDISCOs have had lower FCA rates than KE.
At the hearing, Nepra officials and commentators raised concerns about KE’s efficiency in power generation and adherence to the Economic Merit Order, which ensures cost-effective electricity production. KE representatives explained that their power generation strategy prioritizes efficiency and low-cost resources. They noted that the company primarily relies on its RLNG-based BQPS-2 and BQPS-3 plants and has significantly reduced its use of more expensive furnace oil.
KE officials further clarified that there was no significant change in the amount of power drawn from the national grid compared to the reference month. They attributed the proposed FCA reduction to falling international fuel prices and improved generation efficiency. They also assured Nepra that compliance reports on the Economic Merit Order were regularly submitted for verification. Another topic discussed was KE’s Multi-Year Tariff (MYT), which lapsed in 2023 and is still under regulatory review. As MYT approval is pending, KE’s FCA requests are being processed provisionally using older reference prices. Nepra officials suggested that once the MYT is approved, it would allow KE to align more closely with XWDISCOs by incorporating updated reference pricing and mechanisms.
Last week, the regulatory authority announced a negative Rs1.14 per unit FCA adjustment for XWDISCOs for October 2024. This reduction will appear in customer bills for December 2024. However, certain customer categories, including lifeline users, domestic consumers using up to 300 units, Electric Vehicle Charging Stations (EVCS), agricultural customers, and prepaid electricity customers, will not be eligible for this adjustment. Nepra has yet to make a final decision on KE’s petition and is expected to conclude the matter once all necessary processes are completed.
The regulator’s decision will determine whether KE customers can expect further reductions in their electricity bills, providing much-needed relief amidst broader economic challenges.
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