ISLAMABAD: National Electric Power Regulatory Authority (Nepra) on Tuesday agreed, in principle, to allow Karachi Electric (KE) to increase tariff under monthly Fuel Cost Component (FCA) of six months (January–June) 2021.
However, Nepra has yet not decided that how much increase will be passed on to consumers. KE has sought a 55 paisa per unit increase in FCA for six months to recover Rs 5.308 billion.
Of this, a positive impact of Rs 2.082 billion has been calculated for January 2021, Rs 3.119 billion for February and Rs 3.845 billion for March. KE has also sought negative adjustment of Rs 1.161 billion for April, Rs 2.123 billion for May and Rs 252 million. Nepra has also completed hearing for increase of Rs 1.555 per unit in Quarterly Tariff Adjustment (QTA) for January-March, 2021. The federal government will give a subsidy to offset the increase under QTA.
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KE’s team headed by CFO Aamir Ghaziani informed Nepra Authority that the key reasons behind the positive adjustment in FCA is consumption of expensive furnace oil and RLNG.
KE also stated that it consumed HSD due to “low” pressure of gas being supplied by the SSGCL.
During the hearing, Chairman Nepra quizzed KE officials for not seeking
regulator’s permission to use HSD due to issues in gas supply.
CFO, KE, argued that Nepra has already granted permission to the power utility to use HSD in an emergency situation at the time of issuance of generation licence.
The Chairman Nepra, Tauseef H. Farooqi, was unhappy at KEs reply, saying that this does not mean the power utility can use HSD “whenever it wants”. He further contended that KE was given conditional permission to use HSD. In January, KE consumed HSD of Rs 780 million.
Chairman Nepra further inquired as to why KE purchased electricity from other sources, adding that it was far better for KE to purchase electricity from other sources instead of its own generation.
Responding to the points raised by Chairman Nepra, KE officials explained that the power utility purchases cheap electricity from CPPA-G but it also purchases from other sources to meet its requirements.
Nepra officials claimed that in June 2021, additional burden of Rs 1.12 billion was put on the consumers due to deviation from Economic Merit Order (EMO).
The CFO, KE responded that the power utility is facing the issue of “gas shortage,” including “low gas pressure,” adding that in this regard several letters were sent to SSGCL and Petroleum Division. In a meeting, presided over by the Minister, SSGCL was directed to invest in its system.
In reply to a question regarding signing of Gas Sale Agreement (GSA) with SSGCL, the CFO KE explained that the agreement with the gas utility is linked to the arbitration process in which the main issue is of liability which is to be determined.
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He further stated that GSA between KE and SSGCL will remain in limbo until ToRs of Arbitration Agreement are agreed upon.
Ghaziani maintained that KE has initialled with PLL for 150 MMCFD of RLNG. On August 2, 2021, Ogra gave approval to GSA between KE and PLL.
Answering a question put forth by the Chairman Nepra regarding purchase of gas from any other source instead of SSGCL, the CFO KE said that presently there is limited capacity at the terminal but power utility is considering purchasing from other sources as well. However, currently, KE has to stick with SSGCL for gas supply.
He also assured the regulator that SCADA’s logs would be shown to clear the doubts of Nepra.
Zubair Motiwala, a noted businessman of Karachi, claimed that KE is getting more subsidy compared to other Discos on the one hand but on the other is sending “higher” bills. He questioned as to how long Karachiites would continue to face this situation.
The Chairman Nepra stated that he reckoned KE is generating expensive electricity.
Motiwala said the main reason behind expensive KE’s electricity is the fact that it is not being given any share from hydel generation.
The President Chamber of Commerce and Industry (KCCI) informed the Authority that KE had given connections on more than 100 points but later began massive load shedding on the plea that revenue is not received from these connections.
At this, the Chairman Nepra stated that power utility sheds its load on the basis of revenue and it is akin to “when bulls fight it is the grass that gets trampled”.
The CFO, KE, Aamir Ghaziani, asked President KCCI to share evidence with him, and the issue will be sorted out.
Another consumer from Karachi raised the issue of gas supply to KE’s power plants. He asked why KE is consuming gas - local or LNG - on its BQPS 1 power plant which is “inefficient,” adding that given that the BQPS 2 power plant is more efficient than BQPS 1, why is it not fully utilized? He said, from January 2021 to June 2021 this has been the practice as depicted in work sheets of generation fuel cost variation provide by KE which is in violation of Nepra’s EMO.
Nepra will notify decision, after going through the data submitted by Karachi Electric.
Copyright Business Recorder, 2021
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