Power tariff hike, loadshedding: Consumers heap criticism on Nepra at hearing

ISLAMABAD: The National Electric Power Regulatory Authority (NEPRA) on Thursday faced criticism from consumers at a public hearing for seeking Rs 10.69 per unit increase in base tariff – from Rs 34 per unit to 44.69 per unit - for the next seven years and massive unscheduled loadshedding due to which deaths are being reported.

The issues relating to Karachi came under discussion during the public hearing in the matter of Multi-Year Tariff (MTY) petition filed by K-Electric for its transmission, distribution and supply of power tariff for the period 2024-30.

Chairman NEPRA stated that NEPRA’s team comprising Member Technical, Rafique Ahmad Shaikh and Director General, Consumers Affairs Division (CAD), Naweed Illahi Shaikh are already in Karachi to probe reasons for the recent deaths in the city.

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Arif Bilwani, Imran Shahid, JI, Tanveer Barry, Aneel Mumtaq, Engineer Abu Bakar Ismail, Rehan Javed and others raised questions on different future plans submitted by the power utility company for transmission, distribution and supply tariffs.

The KE’s team led by its Chief Executive Officer (CEO), Syed Moonis Abdullah Alvi and comprising, CFO Aamir Ghaziani, Sadia Dada etc. were present to respond to questions raised by NEPRA’s technical team, and consumers’ representatives.

Chairman NEPRA said that the Authority has earmarked an amount of Rs 200 million to hire a firm for audit of financial data being submitted by different entities, before determination of their tariffs.

Aamir Ghaziani stated that cost of debt local has been requested on three month KIBOR plus spread of 2.5 per cent benchmarked with recent long term local loans obtained with indexation of KIBOR at the start of each quarter to cover for variations. This is almost in accordance with what was benchmarked by the Regulator.

However, foreign cost debt is requested on foreign loans that are necessary to ensure matching of foreign CAPEX outflows with foreign inflows.

The Authority was informed that considering the prevailing economic conditions and degraded country rating have adversely impacted the investors’ confidence, KE be allowed periodic variations in the cost of debt along with appropriate spread over foreign loans.

According to CFO KE, the power utility company has outstanding loans against its assets and plans to take further loans to fund the allowed investment plan in future for which the following costs have been included in the tariff:(i) cost of debt for foreign component to be actualized at each year end based on 3-month SOFR plus CAS plus a spread of 4.5 per cent & 5.8 per cent for ECA backed loan and foreign DFIs respectively; and (ii) tax on interest payments to foreign lenders, premiums and transaction costs have been separately requested as pass through items as the same is also allowed to IPPs with foreign investments operating in Pakistan and are not included separately in the tariff computations.

KE argued that tariff control period for seven years provides a greater visibility to KE for its long term planning and execution of investment plans as KE needs to secure loans from its lenders to implement its investment plans.

Moreover, the investment plan for T&D approved by the Authority also covers a span of seven years i.e. FY 2024-30 and for execution of investment plan, a viable and sustainable tariff for transmission, distribution and supply segment is essential as lenders and shareholders require a clear, long-term outlook on KE’s revenues and profitability to provide these loans.

Further, historically, KE has been allowed a seven-year control period by the Authority so the requested control period ensures consistency with the previous control periods as well. Considering the ground facts, a seven-year control period has been proposed.

Copyright Business Recorder, 2024