ISLAMABAD: National Electric Power Regulatory Authority (Nepra) said on Thursday that it will not reimburse any extra cost of projects or schemes of KE whose costs increased due to delay on latter's part.
This was the crux of second day of public hearing on mid-term review of Multi-Year Tariff (MYT) petition of KE, according to which it had sought an increase of Rs 1.26 per unit in its tariff on the basis of proposed additional investment of Rs 144 billion to improve reliability and safety of consumers.
Presided over by Chairman Nepra, the Authority and its technical team raised a number of questions about proposed investment, reasons of delay in projects, load shedding and other issues.
As the proceeding started, CFO KE, Aamir Ghaziani acknowledged that there are issues in KE which are definitely needed to be rectified and efforts are afoot in this regard. For this purpose, the power utility was looking at the directions of Nepra and trying to proceed in light of its guidance.
The interveners criticise KE's performance. Nepra directed KE not to engage in load shedding during night.
KE has sought permission for an additional investment of Rs 144 billion over and above the Nepra allowed capex of Rs 299 billion for the tariff control period, and emphasized that these additional investments were critical to meeting the service obligations, including bridging the power demand-supply gap and strengthening the network, and thus are in the interest of consumers. It was highlighted that the approved MYT assumes an exchange rate of Rs 120/USD (December 2019), whereas the actual was PKR 159/USD, thus having material implications for the company.
With regards to future investments KE officials apprised the Regulator that it was pushing ahead with the 900 MW RLNG-based BQPS-III and that an additional 1,400 MW of electricity would also be added from the National Grid by 2023 to its system with the construction of two new interconnection facilities.
Ghaziani while presenting the case of 900 MW RLNG-fired power plants, argued that delay in 900 MW (450 + 450 MW) power plant was on part of the government not the power utility and requested rupee depreciation on the basis of investment of $ 730 million dollars.
Nepra team, however, was of the view that depreciation had not been taken into account with the power utility in this regard. The CFO KE said that the power utility had been given understanding that its plant will be treated at par with Haveli Bahadar Shah's.
However, when the CFO said that it would be a discrimination against KE if depreciation was not allowed like the IPPs the Chairman Nepra took a serious note of it, saying it is a very serious allegation. CFO, who was very polite during the entire hearing, however, tendered an apology on use of the word "discrimination".
Chairman Nepra said that KE has been conveyed that it would not approve extra cost of any project or scheme delayed due to KE's own "fault". He said KE was responsible for a 15-month delay in 900 MW RLNG project. On this Saif Ullah Chattha, Member Nepra, said that the Authority will look into the reasons for the delay after the hearing, adding that if a decision has already been taken, then there is no need of hearing.
Chairman Nepra clarified that KE has already been communicated that extra cost will not be allowed if delay was on part of the power utility.
Ghaziani explained that 900 MW RLNG-fired power plant was delayed due to government approvals not because of the power utility. However, it will now be completed in 2023.
During the public hearing conducted here, Nepra directed KE to submit details of contractors engaged by KE, including their salaries. The Chairman Nepra said that it was their duty to ask for details of expenditure. The CFO, however, explained that contracts are awarded on lump sum basis with the OEM and they do not ask for salaries of contractors.
The Authority also raised questions on demand of additional Rs 16 billion as capex on account of O&M of its power plants. KE's technical team answered the questions raised by the Authority and its technical team.
The Chairman Nepra said that as many as 0.6 million people in Karachi who were facing 9-hour load shedding.
On a question raised by Saif Ullah Chattha, the CFO KE said that load shedding of 1-2 hours is being done in low loss areas as 400 MW generation is due to low gas pressure from SSGC. He said high-loss areas are facing nine-hour load shedding whereas load shedding in mid-loss areas was of 5 hours. He said that demand of electricity was 3220 MW against the supply of 2800 MW.
He said, due to Covid-19, the power utility's industrial supply was affected and there was more consumption on the domestic side.
He further stated that additional capax was recorded due to change in 500 KV transmission line and designs of interconnection grids.
KE officials also informed Nepra that the company had invested around Rs 29 billion over and above what Nepra allows in the Generation and Distribution (excluding G&T projects) which has resulted in significant improvements in generation fleet reliability and availability, including efficiency improvements passed on to consumers along with significant improvements at consumer level which includes the reduction in load-shedding with over 75% of the feeders being LS (load shedding) exempt today.
The interveners were furious at the performance of KE with respect to supply, reliability of system and raised questions on demand of additional investment of Rs 144 billion. One of the interveners said that the power utility was also seeking approval for ABC cable which has already been laid.
After the hearing, the Authority reserved its judgment which will be announced later on.
Copyright Business Recorder, 2020
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