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The National Electric Power Regulatory Authority (NEPRA) has decided to reduce K-Electric’s average tariff by Rs 7.6 per unit, bringing it down from Rs 39.97 per kWh to Rs 32.37 per kWh. However, the utility clarified that the revision applies only to regulatory calculations and will not affect monthly electricity bills for consumers.
This change reflects a broader trend in the energy sector aimed at ensuring more equitable pricing for consumers. While K-Electric has expressed concerns about the sustainability of this move, the adjustment indicates a shift towards a more balanced energy pricing model. It is important to note that this change will only impact regulatory calculations and will not alter monthly electricity bills for consumers, suggesting that NEPRA is taking steps aligned with practices seen in other regions.
K-Electric’s position on the matter highlights that the ongoing dispute is rooted in NEPRA’s assessment of various motions concerning KE’s multi-year tariff (MYT) for the period from 2024 to 2030. K-Electric asserts that NEPRA’s ruling has substantially modified critical components, including the investment plans for generation, transmission, and distribution, alongside the evaluations of energy losses. As a result, K-Electric believes that the revised framework poses significant challenges to the sustainability of the company’s long-term operations.
K-Electric also expressed concern that the decision fails to account for operational realities and recovery mechanisms. The company noted that while NEPRA upheld its earlier stance on write-off claims, it significantly changed other areas that could affect KE’s ability to maintain financial stability.
Analysts Point to Deeper Disagreements Behind Tariff Dispute
Industry analysts noted that this latest K-Electric, NEPRA clash over tariff cut stems from broader differences in how the regulator and the utility interpret cost recovery, investment requirements, and consumer protection. The regulator, meanwhile, emphasized that the adjustments aim to ensure transparency and prevent inefficiencies from being passed on to the federal government through subsidies.
NEPRA maintained its decision to keep KE’s tariff aligned with a 100 percent recovery target, removing upfront recovery losses to ensure no additional burden falls on taxpayers. It also instructed the utility to file revised fuel cost adjustment claims for FY 2023–24 and to resubmit annual tariff adjustments for the next two fiscal years.
While the power regulator insists the decision promotes efficiency and fiscal discipline, KE warned it could affect its service sustainability. The company said it is reviewing the decision in detail and plans to explore all available remedies under the existing laws and regulatory framework.
The ongoing standoff highlights the continuing tension between K-Electric and NEPRA over how to balance consumer protection with the financial viability of Pakistan’s only privatized power distribution company.
Power Division Issues Clarification
The Ministry of Energy has clarified that NEPRA’s recent determination on K-Electric’s multi-year tariff has been misrepresented by some as being against Karachi’s electricity consumers. In reality, the decision protects their interests and promotes accountability.
A spokesperson for the Power Division explained that K-Electric, a private entity, is expected to perform better than public distribution companies such as IESCO, FESCO, and GEPCO. However, public utilities have outperformed K-Electric in recovering dues, reducing line losses, and ensuring service quality.
NEPRA’s review primarily focuses on K-Electric’s administrative and operational performance. The company currently draws around 2,000 MW from the national grid, which provides cheaper electricity than its own generation. The spokesperson noted that consumers in Karachi already pay the same tariff as those elsewhere in Pakistan. If K-Electric reduces its internal costs, this will help maintain uniform national rates rather than increase them, which benefits consumers.
The Ministry clarified that subsidies will continue for all consumers, including those of K-Electric. However, these subsidies cannot turn into profit for the company through inefficiency or inflated losses. K-Electric will now have to prove with evidence that any unrecovered dues are genuinely irrecoverable before they are factored into consumer bills. Arbitrary inclusion of costs will no longer be allowed.
NEPRA has also acted to ensure that K-Electric’s profits remain reasonable. Previously, its return on investment ranged from 24% to 30% and was linked to the US dollar. Under the revised framework, dollar indexation has been removed, as K-Electric’s assets and operations are in Pakistan. The rate of return may also be reduced, similar to the renegotiations done with independent power producers (IPPs).
NEPRA Cuts Recognized Loss Levels After K-Electric’s Own Audit Findings
An independent consultant appointed by K-Electric itself found that the company failed to reduce losses despite heavy expenditure, allowing up to 6.5% of losses in consumer bills. Based on these findings, NEPRA has reduced recognized loss levels to protect the public interest.
The regulator has further directed that idle power plants be excluded from the tariff to prevent consumers from paying for non-operational capacity. Since K-Electric now draws more power from the national grid, fuel costs are expected to decrease. A similar federal government initiative for public plants has already helped lower national tariffs.
The Power Division emphasized that NEPRA’s decision is a significant step for transparency and consumer protection. It reduces the burden on taxpayers, discourages inefficiency, and ensures that subsidies benefit citizens rather than private entities. K-Electric must now improve its operations and reduce losses.
There is no risk of additional load-shedding in Karachi, as sufficient and cheaper power from the national grid is available, with the necessary infrastructure already in place.
