ISLAMABAD: The Board of K-Electric (KE) is set to approve additional write-off claims to ensure the approval of Rs 50 billion related to billing for FY 2017 to 2023, as per an understanding with the Task Force on Energy, headed by the Minister for Power, Sardar Awais Khan Leghari.
All of KE’s pending and undecided matters are currently under the consideration of the Task Force, well-informed sources told Business Recorder.
According to the notice, the 125th meeting of the KE Board of Directors will be held on March 18, 2025, to approve additional write-off claims for the billing period related to the financial years 2017 to 2023, which will be submitted to the National Electric Power Regulatory Authority (Nepra).
KE’s Rs68bn write-off claims: Nepra reserves verdict
Earlier, Chairman of the KE Board, Mark Gerard Skelton, noted that since the company might not be able to comply with the requirement of sending meeting notices and working papers seven days in advance, he shared a brief explanation of the matters that needed to be discussed at short notice.
With reference to the write-off claims related to the MYT 2017-2023 filed by KE, he stated that discussions were held with the Task Force on Energy, the Power Division, and Nepra. During those discussions, it was highlighted that claims related to the billing period prior to FY 2017 may not be permitted.
However, since claims for previous periods may be disallowed, it was agreed that KE could file additional claims related to the billing for FY 2017 to FY 2023 to ensure the approval of claims totalling Rs 50 billion out of the Rs 68 billion initially filed. The additional claims should also meet the criteria outlined in the tariff determination.
The claim submission process includes a review by the internal auditors, followed by final verification by the company’s statutory auditors. Internal auditors have verified claims of Rs 8.9 billion. Currently, the claims are being verified by statutory auditors, and an amount of Rs 6 billion has already been verified. It is expected that their verification exercise will be completed soon. The final claim amount, as verified by external auditors, will be presented to the BAC and the BoD for approval prior to submission to Nepra.
“Since we need to submit the claim to Nepra for processing as soon as possible, we will schedule BAC and BoD meetings on very short notice once we have visibility on the actual date when auditors will be able to conclude their verification exercise,” the Chairman of KE Board wrote to Board members.
On December 10, 2024, Nepra reserved its decision regarding the write-off of Rs 68 billion in claims from K-Electric for the period from 2017 to 2023, following arguments and counterarguments between the Nepra members and the KE team.
The amount of write-off claims was as follows: (i) FY 2017, Rs 6.195 billion; (ii) FY 2018, 3.371 billion; (iii) FY 2019, Rs 4.050 billion; (iv) FY 2020, Rs 7.492 billion; (v) FY 2021, Rs 16.040 billion;(vi) FY 2022, Rs 14.489 billion; and (viii) FY 2023, Rs 16.264 billion.
During the hearing, KE’s Chief Financial Officer (CFO) Aamir Ghaziani explained that if the write-off claims were approved by the Authority, the amount would be adjusted within the previously allocated Rs 88 billion for the financial year 2024-25. This would be incorporated into the tariff though it is up to the government to decide how much of the impact will be absorbed by the state and how much will be passed on to consumers.
Nepra’s Member (Finance) challenged KE’s claim for the 2016-17 period and sought a justification for the demand. The KE team argued that because the Multi-Year Tariff (MYT) determination does not specify a particular period, the company has the right to claim unpaid amounts from consumers.
KE’s Chief Executive Officer (CEO) Syed Moonis Abdullah Alvi had stated that the national recovery ratio is around 90%, while the remaining 10% is part of the circular debt, which currently stands at approximately Rs 2.8 to Rs2.9 trillion. This debt is being recovered through surcharges from consumers, which are routed to the Power Holding Limited (PHL). He emphasised that KE consumers are paying surcharges for circular debt despite having no involvement in it. He questioned whether a write-off claim of 3.6% of total recovery would be considered prudent and suggested that such claims should be included in the tariff.
KE CEO Moonis Alvi and CFO Ghaziani underscored the financial strain caused by unpaid dues. They explained that while Nepra’s 2018 determination allowed for a 1.69% provision for recovery losses, KE has yet to receive any compensation for these losses under the MYT. Of the Rs 119 billion in bad debts recorded in its audited accounts, KE has requested approval for Rs 68 billion, asserting that these claims adhere to Nepra’s established verification criteria.
A key issue raised during the hearing was the inclusion of Rs 24 billion in write-offs from FY2016, which predates the current MYT period. Alvi argued that write-offs inherently relate to previous liabilities and emphasised that regulatory consistency is crucial for fair treatment. He noted that Nepra’s conditions did not specify a restriction on the fiscal years eligible for such claims.
KE had also highlighted its recovery efforts, which include disconnections, engagement of external recovery agencies, and instalment payment options for defaulters. Despite achieving a peak recovery rate of 95.4% in FY2022, macroeconomic factors and tariff hikes have since undermined the utility’s ability to sustain high recovery rates.
Ghaziani emphasised that KE’s write-off claims strictly pertain to billed but un-recovered amounts and do not include energy theft or unbilled units.
Copyright Business Recorder, 2025
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