Cabinet to direct Nepra to reconsider its KE decision
Cabinet to direct Nepra to reconsider its KE decision

ISLAMABAD: The Federal Cabinet is to direct National Electric Power Regulatory Authority (Nepra) to reconsider its decision with respect to Karachi Electric's (KE) recovery of over Rs 100 billion.

The tariff determined by Nepra was duly notified by the Federal Government on May 22, 2019. Further quarterly tariff adjustments determined by Nepra on December 31, 2019 of eleven quarters, on the basis of last quarter April-June 2019, was notified on October 12, 2020 to maintain uniform tariff in country pursuant to ECC decision of March 26, 2020.

In Discos the difference between actual cost of supply power and reference rates is passed on to consumers prospectively through Fuel Cost Adjustment (FCA) and Quarterly Tariff Adjustments (QTAs) mechanism.

However, in the case of KE the reference rates ( fuel and capacity) are rebased on quarterly basis through "mechanisms for adjustments" as provided in Multi-Year Tariff (MYT) determined by Nepra and accordingly the difference in actual and reference rates relates for previous period cannot be charged to consumers prospectively and hence are to be paid through GoP subsidy, if required.

KE, in its letter of November 10, 2020 requested the Power Division to expedite the process of notification of quarterly tariff adjustments for previous ten quarters effective from October - December 2016 and ending on January -March 2019 determined through Nepra decision of December 31, 2019 along with quarterly adjustments from April 2019 to March 2020 determined by Nepra in its decision March 10, 2021. KE also requested that necessary supplementary allocations be made as the amounts due to KE are being deferred resulting in strained working capital position impacting on its ability to sustain operations and make necessary investments in power infrastructure.

Power Division recently submitted the following proposals to the ECC: (i) The QTA decision of 10 (ten) earlier quarters beginning from October-December 2016 and ending on January-March 2019 and further 4 (four) quarterly adjustments from April 2019 to March 2020 recommended by NEPRA vide its decisions dated December 31, 2019 and dated March 10, 2021 be notified which would result in additional subsidy release of around Rupees 101 billion subject to necessary verification and reconciliation through an A - rated Audit firm. Accordingly, necessary supplementary allocations be made in this respect; or (ii) Federal Government may issue guidelines to NEPRA and require it to reconsider its decisions to recover the additional subsidies data by way of determination of separate line item as adjustment in tariff-to be recovered prospectively from consumers or provision of appropriate subsidy over the remaining MYT period of KE.

Power Division further argued that to reduce the KE Payables towards CPPA-G the subsidy amount as a result of above QTAs notifications may be released to CPPA-G so that continuity of supply be ensured. The ECC, in its meeting on September 30, 2021 decided to refer the case to Nepra to reconsider its decision.

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