KE Consumers to See Rs0.27/unit Cut

December 13, 2024 Mahi Bukhari

Introduction

Consumers of K-Electric (KE) are set to experience a reduction of up to Rs0.27 per unit in electricity rates as part of the Fuel Charge Adjustment (FCA) for October 2024. This follows a previous reduction of Rs0.17 per unit in September 2024, offering some financial relief to Karachi’s residents.

Overview of Fuel Charge Adjustment

The National Electric Power Regulatory Authority (Nepra) held a public hearing to discuss KE’s proposed FCA adjustment. During the hearing, Nepra presented data comparing FCA rates over the past three years, showing that KE customers have generally paid lower FCA rates than those served by other power distribution companies, known as XWDISCOs.

Proposed Reduction and Public Hearing

KE’s Request and Nepra’s Analysis

KE had requested a Rs0.27 per unit reduction to be passed on to its customers for October 2024. The public hearing sparked intense discussions, with some commentators alleging that Karachi residents bear the brunt of “expensive” electricity due to inefficiencies and higher production costs. Nepra officials countered these claims with data showing that KE customers have not faced the highest FCA charges nationwide in recent years.

Comparative Data on FCA Rates

For example, in 2022, KE’s FCA was Rs3.62 per unit, while XWDISCOs charged Rs4.41 per unit. In 2023, KE’s FCA was negative Rs2 per unit, compared to XWDISCOs’ positive Rs0.90 per unit. In 2024, XWDISCOs charged Rs2.92 per unit, while KE’s adjustment stood at Rs1.37 per unit. However, Nepra members acknowledged that in FY25, XWDISCOs have so far achieved lower FCA rates than KE.

KE’s Efficiency and Economic Merit Order Compliance

Power Generation Strategy

During the hearing, concerns were raised about KE’s efficiency in power generation and adherence to the Economic Merit Order, which ensures cost-effective electricity production. KE representatives explained their strategy prioritizes efficiency and low-cost resources. They emphasized their reliance on RLNG-based BQPS-2 and BQPS-3 plants and noted significant reductions in the use of more expensive furnace oil.

Improved Generation Efficiency

KE officials attributed the proposed FCA reduction to declining international fuel prices and improved generation efficiency. They also assured Nepra that compliance reports on the Economic Merit Order were regularly submitted for verification.

Multi-Year Tariff (MYT) and Provisional FCA Adjustments

Status of MYT Approval

Another issue discussed was KE’s Multi-Year Tariff (MYT), which lapsed in 2023 and remains under regulatory review. Since MYT approval is pending, KE’s FCA requests are being processed provisionally using older reference prices. Nepra officials indicated that once the MYT is approved, KE could align more closely with XWDISCOs by incorporating updated reference pricing and mechanisms.

Recent Adjustments for XWDISCOs

Last week, Nepra announced a negative Rs1.14 per unit FCA adjustment for XWDISCOs for October 2024, to be reflected in customer bills for December 2024. However, certain customer categories, including lifeline users, domestic consumers using up to 300 units, Electric Vehicle Charging Stations (EVCS), agricultural customers, and prepaid electricity customers, will not be eligible for this adjustment.

Anticipated Regulatory Decision

Nepra has reserved its decision on KE’s petition and is expected to finalize the matter after completing the necessary processes. The regulator’s decision will determine whether KE customers can expect further reductions in their electricity bills, providing much-needed relief amid broader economic challenges.

FAQs

1. What is the Fuel Charge Adjustment (FCA) for KE consumers?

The Fuel Charge Adjustment (FCA) for KE consumers is a periodic adjustment in electricity rates based on fluctuations in fuel prices. For October 2024, KE has proposed a reduction of Rs0.27 per unit.

2. How does KE’s FCA compare to other power distribution companies?

Historically, KE’s FCA rates have been lower than those of other power distribution companies (XWDISCOs). For example, in 2022, KE’s FCA was Rs3.62 per unit, while XWDISCOs charged Rs4.41 per unit.

3. What measures is KE taking to improve efficiency?

KE is prioritizing efficiency and low-cost resources in its power generation strategy, relying primarily on RLNG-based BQPS-2 and BQPS-3 plants and significantly reducing the use of more expensive furnace oil.

4. What is the status of KE’s Multi-Year Tariff (MYT)?

KE’s Multi-Year Tariff (MYT) lapsed in 2023 and remains under regulatory review. Pending MYT approval, KE’s FCA requests are being processed provisionally using older reference prices.

5. Will all KE consumers benefit from the proposed FCA reduction?

Not all KE consumers will benefit from the proposed FCA reduction. Certain categories, including lifeline users, domestic consumers using up to 300 units, EVCS, agricultural customers, and prepaid electricity customers, are not eligible for the adjustment.