There is some good news for Karachi’s power consumers. NEPRA has concluded its hearing on KE’s provisional FCA request for a relief of Rs. 4.98 per unit. This reduction translates into a relief of Rs. 7.18 billion. Following the public hearing, the regulator is expected to issue a decision clarifying the exact FCA amount to be passed on to customer bills and the period for which it will apply.
A key factor behind the reduced FCA is KE’s sourcing of 67 percent of its electricity from NTDC, which supplies lower-cost energy. However, this raises a broader question: should KE be allocated more electricity from NTDC to ensure consistent relief for Karachi’s consumers?
That seems to be happening.
During the hearing, a KE representative highlighted that the current offtake from NTDC is capped at 1,600 MW due to the ongoing completion of a critical 500 kV circuit by NTDC, expected to be completed by summer this year. Once completed, this infrastructure advancement could pave the way for achieving the ideal 2,000 MW draw from NTDC.
It is important to note that infrastructure constraints limiting the full utilization of NTDC’s capacity reflect ongoing challenges in transmission planning and execution. Demand in Karachi increased by 12 percent to 2,300 MW in November, partially due to unseasonably warm temperatures. Month-on-month, however, demand fell by 13-14 percent, reflecting typical seasonal trends.
With Karachi’s rapid growth, it is imperative to manage seasonal variability in demand more effectively, especially as climate change drives permanent shifts in consumption patterns.
Approximately Rs. 5 per unit FCA reduction is a welcome relief, but questions remain about the sustainability of such energy cost reductions in the power sector.
It is pertinent to note that KE’s privatized model excludes it from contributing to the circular debt crisis, which amounts to Rs. 2,467 billion. Yet, Karachi’s consumers continue to bear the burden of the PHL surcharge. If increased NTDC allocations to KE result in reduced FCA charges, it could help alleviate these pressures. Karachi’s growing energy demand underscores the need for robust infrastructure and policy solutions to manage future requirements efficiently.
However, solely relying on NTDC is not a sustainable solution. During the same period, CPPA-G requested a significantly smaller FCA reduction of Rs. 0.69 per unit for other XWDISCOs. Policymakers must address systemic inefficiencies and the cost burdens within the energy supply chain to achieve equitable outcomes nationwide.
As Karachi’s energy demand continues to grow amid unplanned urban dynamics, the interplay between policy decisions, national grid allocations, and privatized models like KE remains a critical area for discussion.
In a nutshell, the FCA reduction has indeed provided relief but highlights the pressing need for a cohesive, long-term energy strategy to uphold the power sector’s overall well-being, keeping all eyes firmly on the regulator.