KCCI urges NEPRA to put proposal of increasing security deposit rates in abeyance

February 11, 2025 (MLN): The Karachi Chamber of Commerce & Industry (KCCI) has urged the National Electric Power Regulatory Authority (NEPRA) to put the proposed increase in security deposit rates by Distribution Companies (DISCOs) in abeyance.

“The proposed increase, such as raising B2 security deposits from Rs2010/KW to Rs54,783/KW is excessive and financially inviable”, President KCCI Muhammad Jawed Bilwani stated in a letter sent to Registrar NEPRA.

KCCI emphasized the need for transparency, stating that the requisite information must be shared with all concerned stakeholders before any decision is made, according to the press release issued

They also called for an inclusive and meaningful consultation process to ensure that any decision considers the financial constraints of consumers and businesses alike.

President KCCI added that such an unbearable hike in security deposits would leave consumers with no other option but to switch to self-generation of electricity via solar technology.

This shift would plunge DISCOs into deep crises as their consumers would rapidly diminish.

He further stated that members of the business community, trade bodies, and consumers have expressed grave concerns over the recent petitions filed by various Ex-WAPDA Distribution Companies (DISCOs).

These petitions seek an unprecedented increase in security deposit rates for power connections.

These proposals, if approved, will place an excessive financial burden on consumers, businesses, and industries across the country, he added.

He said that the DISCOs have sought NEPRA’s approval to revise security deposit rates in accordance with electricity consumption, property size, and even market value.

Such a drastic increase, without a transparent and well-communicated rationale, would create undue financial hardships for consumers and businesses already struggling with escalating electricity tariffs and economic pressures.

President KCCI stressed that any such revision must be subject to an extensive consultation process involving all relevant stakeholders, including trade bodies, chambers of commerce, and consumer associations.

A thorough impact assessment is essential before implementing any measures that could further strain businesses and consumers.

He also observed that DISCOs and K-Electric have collected security deposits amounting to approximately four times the maximum demand and seven times the average demand of consumers.

In this regard, Bilwani highlighted that K-Electric has collected security deposits from all its consumers to sanction a massive 13,000 megawatts.

However, even during peak times, the highest electricity demand reaches only 3,500MW, while under normal circumstances, it averages somewhere between 2,200 and 2,400MW.

“This clearly indicates how excessively the utility service has exploited the public by imposing unfair security deposits", President KCCI noted.

"Similar is the situation with the rest of the country as all DISCOs including KE have sanctioned a gigantic load of 97,800 megawatts whereas the electricity demand all over the country peaks to 23,000MW only”, he added.

In another letter sent to Registrar NEPRA, President Bilwani stated that NEPRA must direct all DISCOs to conduct an extensive audit of security deposits and consumer contributions, ensuring public disclosure of these funds.

He emphasized the need for a detailed report on the total security deposits held by each DISCO, including K-Electric, along with a breakdown of how these funds have been utilized over time.

He further stated that any interest generated on consumer security deposits must be accounted for and returned to the respective consumers, as per regulatory obligations.

He mentioned that consumers directly finance a substantial portion of power infrastructure, including installations at all voltage levels and contributions to grid-sharing costs.

These consumer-funded assets are transferred to DISCOs at no charge, raising concerns about their inclusion in the Regulated Asset Base (RAB).

Hence, President KCCI urged NEPRA to verify that DISCOs are not unfairly earning returns on assets financed by consumers.

To uphold transparency and fairness, a comprehensive audit report detailing security deposits, consumer contributions, and their usage should be made publicly accessible before any consideration of increasing security deposit requirements.

He opined that the lack of clarity in these financial matters has far-reaching implications for the power sector.

Mismanagement or unjustified retention of consumer funds distorts cost structures, potentially leading to unfair tariff increases and inefficiencies in infrastructure investment.

“A transparent and publicly available audit will enhance consumer trust, ensure regulatory compliance, and contribute to a fairer power sector", President KCCI added.

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