K-Electric has sent a legal notice to the Ministry of Energy (Power Division), kicking off a legal battle over the implementation of a tariff decision taken by the National Electric Power Regulatory Authority (NEPRA).
Responding to a review petition, NEPRA had released its decision on Thursday, July 5th 2018 regarding K-Electric (KE)'s petition for the reconsideration of its Multi Year Tariff (MYT) for the period commencing from July 1st, 2016 to June 30th, 2023.
As per that decision, MYT has been determined at Rs 12.8172, an increase of about Rs 0.0464 from the MYT determined by NEPRA previously in October 2017. The newly determined Multi-Year Tariff comprises of three segments i.e. Generation, Transmission and Distribution where tariffs for the three segments were determined at 9.7351, 0.6192 and 1.3890 respectively.
The company believe that it will not be able to fuel its future investment programme with such a thin tariff increase.
Following the expiry of the previous MYT on June 30, 2016, K-Electric had filed its Integrated Multi Year Tariff petition on March 31, 2016 requesting the determination of MYT for a period of 10 years commencing from July 01, 2016 to June 30, 2026.
As against its request for an increase in MYT from Rs 15.50 per kWh before expiry to Rs 16.10 per kWh for a further period of ten years, it was decided that an MYT would be awarded to KE for a period of 7 years, effectively reducing the overall tariff by Rs 3.43 to Rs 12.07 per kWh.
Aggrieved by this decision, K-Electric had filed a ‘Motion for Leave for Review‘(MLR) where certain issues were raised including heat rates and auxiliary consumption, rate of return, O&M cost, load shedding assumption, T&D losses and recovery and investments, among other issues.
As a result, in October 2017, it was decided the K-Electric tariff would be enhanced by around Rs 0.9 per kWh from Rs 12.0692 to Rs 12.7706 per kWh.
Immediately after this decision, KE filed a request with the Ministry of Energy to reconsider the determined MYT in the name of ensuring KE’s sustainability and to allow it to continue with further investments in infrastructure to provide a smooth and reliable supply to its consumers.
On Thursday, 26 July 2018, Sindh High Court passed an ad interim order, directing the Ministry of Energy, NEPRA and the Appellate Tribunal of the ministry that no adverse action shall be taken by the defendant against the plaintiff without a due process of law.
According to local media sources, in the letter sent through its legal counsel to the Power Division secretary on July 26, K-Electric asked the ministry to comply with the court’s order and refrain from taking any adverse action against the company including issuance of a notification for implementing the tariff decision until the appeal was decided in accordance with the law.
Major concerns raised by KE in its disagreement on the determination of MYT included a) inappropriate accounting of its Recovery Loss, b) absence of a performance based tariff structure as had been implemented in the previous MYT determinations, c) methodology issues regarding assessment of Regulatory Asset Base and d) usage of a notional debt to equity ratio instead of the actual.
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