K-Electric (KE) has submitted a petition to the National Electric Power Regulatory Authority (NEPRA) seeking approval to raise its power tariff by Rs10.69 per unit, aiming for a new rate of Rs44.69 per unit for the fiscal year 2023-24. The proposed adjustment is intended to partially offset financial losses and enhance the company’s working capital, which will require increased government subsidies.
During a media briefing, K-Electric spokesperson Ovais Munshi clarified that the proposed tariff increase is meant for the company itself and will not impact the end-consumer tariffs, which will remain at a uniform rate of Rs35.50 per unit nationwide, including for KE consumers. NEPRA is scheduled to hold a public hearing on this petition on June 27, 2024.
Munshi explained that the government would cover the gap — approximately Rs9.19 per unit — between the new proposed selling price and the end-consumer tariff through subsidies. He highlighted that NEPRA had previously approved a power supply tariff of Rs52.22 per unit for the power distribution company serving tribal areas, whereas the tariff for the Islamabad distribution company is significantly lower at Rs30.88 per unit, attributed to better bill payments by end-consumers and reduced line losses. The average base tariff for utilities stands at Rs35.50 per unit, with most distribution companies maintaining tariffs below Rs40 per unit.
Addressing the unique challenges faced by KE in Karachi, Munshi pointed out the city’s numerous slum areas and lower average household incomes compared to Islamabad. These factors complicate KE’s efforts to improve monthly billing recovery, resulting in sustained losses. Citing a World Bank study, Munshi noted the disparity in slum numbers and household incomes among Karachi, Islamabad, and Lahore. “There are over 900 slums in Karachi compared to a mere 42 in Islamabad. The average household income in Karachi stands at $184/month compared to $266/month in Islamabad and $220/month in Lahore,” he highlighted.
Munshi detailed the breakdown of the requested new tariff of Rs44.69 per unit, which includes:
- Rs18.88 per unit for energy purchase price (EPP)
- Rs12.54 per unit for capacity purchase price (CPP)
- Rs3.84 per unit for transmission charges
- Rs3.84 per unit for distribution charges
- Rs0.42 per unit for operation and maintenance
- Rs0.59 per unit for retail margin
- Rs2.88 per unit for recovery loss allowance
- Rs2.07 per unit to enhance working capital
The proposed increase aims to stabilise KE’s financial health and ensure the continuous supply of electricity to its consumers despite the challenges posed by the economic landscape in Karachi. As the public hearing approaches, the outcome will determine how KE navigates its financial and operational hurdles moving forward.
