Multi-Year Tariff mechanism: KE seeks Rs3.8/unit hike in base tariff for seven years
ISLAMABAD: K-Electric (KE) has sought increase in its base tariff by Rs 3.8375 per unit under Multi-Year Tariff (MYT) mechanism for the period for seven years; i.e., FY 2023-24 to FY 2029-30.
The power utility company, in its MYT petition, has sought an increase by Rs 1.9274 per unit as O&M expense to be indexed annually with Pak Consumer Price Index.
The company has also sought adjustment of Rs 0.189 per unit as deferred revenue for revision in investment plan for additions. The total amount of O&M; i.e., Rs 30.845 billion has been translated into Rs 1.9274/kWh based on projected units billed for FY 2024.
The proposed financial impact of working capital will be Rs 0.0821 per unit, which will be indexed quarterly with KIBOR and annual adjustment for changes in working capital requirements based on actualization of balances. The financial impact of Return on Regulatory Asset Base - Cost of Debt (RoRB -COD) - will be Rs 0.1303 per unit on foreign component and Rs 0.8646 per unit on local component, totalling to Rs 0.9949 per unit. Foreign component actualised annually with prevalent exchange rates at principal repayments date and actual mark-up payments while local component to be indexed quarterly with KIBOR.
KE has sought an increase in tariff of Rs 0.5535 per unit on account of Rate of Return Based –Cost of Equity (RoRB-CoE). It will be indexed quarterly with USD to Rupee exchange rate. It will also be adjusted for revision investment plan.
Return on Regulatory Asset Base tariff components including RoRBCoD, RoRBCoE and depreciation have been calculated based on proposed addition to RAB, with same Return on Equity; i.e., USD 16.67% as currently allowed under the existing IVIYT. However, change in RoRB components as compared to MYT 2017-23 is due to change in macro-economic factors and increase in investments made to ensure reliability and continuity of smooth supply to consumers.
The projected impact of depreciation will of Rs 0.4669 per unit, to be adjusted for revision in investment plan.
The proposed investment plan is of Rs 136.765 billion for distribution, Rs 17. 506 billion for support functions (on reference macroeconomic factors) and carryover of FY 2023 projects along with appropriate indexation and revision mechanism on Annual (Annual Investment Update) basis.
Further, KE has proposed actualisation of units billed due to variations in units served at allowed distribution loss each year as allowed to other Discos, as the same is based on multiple uncontrollable factors including economic growth, government policies, incentive packages, etc.
KE maintains that for execution of investment plan a sustainable cost-reflective tariff is a key pre-requisite. This tariff is crucial for KE to obtain Board approvals, secure funds and negotiate financing with both local and international lenders for undertaking this investment plan. In the absence of tariff, the execution of investments has been delayed. Consequently, this will cause delays in meeting the approved completion timelines based on which the Investment Plan was prepared and approved.
In this regard, KE has requested the Authority that the allowed completion period shall be taken as the period requested by ICE for completion of planned investments with the addition of days between the date of Distribution, Transmission and Supply tariff determination, whichever is later, and July 01, 2023.
Investments planned by KE, as well as, dedicated consumer funded will help in addition of 3,251 MW of load in ICE’s network and growth of 1.4 million customers in the 7-year control period which will help to serve the growing demand and customer base. The projected growth in Base Energy Demand is kept at 2.4% growth rate while considering captive consumers’ influx and PV disruption. Further, improvement in technical loss is also incorporated to reduce the demand by improvement in the infrastructure.
Moreover, keeping in view the reduction in AT&C losses, KE is projecting to increase the number of load shed exempt feeders to 95% by the end of control period, as a result served energy would increase. KE would like to highlight that the Load Shed policy is based on analysis of T&D and recovery ratios of respective feeder. It is essential to acknowledge that various external variables can exert significant influence on consumer behaviour and consumer’s capacity to meet financial obligations, which not only have an unfavourable impact on recovery ratios but also leads to an increase in electricity thefts. These external factors encompass, but are not limited to, substantial increases in electricity tariffs, political instability, currency depreciation and inflationary pressures which ultimately lead to a lower number of load shed free feeders.
Nepra has sought comments from stakeholders within seven days, aimed at incorporating them in the discussion at the time of public hearing.
Copyright Business Recorder, 2024
Comments
Comments are closed.