K-Electric Seeks Unprecedented Price Increase

K-Electric Seeks Unprecedented Price Increase

Rs11.34 Per Unit Increase In Its Monthly Fuel Cost Adjustment

As the Karachi-based power utility sought an unprecedented Rs11.34 per unit increase in its monthly fuel cost adjustment, a group of influential Saudi and Kuwaiti investors in K-Electric Ltd. had a busy day on Thursday lobbying with top government officials to break the impasse over hundreds of billions of rupees in unresolved claims and counterclaims. 

The transfer of the troubled private power utility to Shanghai Electric of China, which struck a deal with K-majority Electric’s shareholders in 2016 to buy over 66 percent of its shares for $1.77 billion, has been hampered by the non-settlement of financial claims on K-Electric by the government-owned electricity and fuel suppliers and vice versa. Along with the head of the power sector regulator and other significant stakeholders, the KE delegation met with Prime Minister Shehbaz Sharif and his ministers. 

Sharif Requested That All Outstanding K-Electric-Related Concerns Be Resolved

According to reliable sources, Prime Minister Sharif requested that all outstanding K-Electric-related concerns be resolved within three months by the energy sector task force, which is headed by the late Shahid Khaqan Abbasi. The company owes the Central Power Purchasing Agency around Rs400 billion, Sui Southern Gas Company Ltd. over Rs200 billion, and it has equivalent claims against the federal and provincial governments. 

Separately, it requested that the National Electric Power Regulatory Authority (Nepra), the industry watchdog, permit an increase in fuel costs of Rs11.34 per unit under the monthly fuel cost adjustment (FCA) for energy sold in May to produce around Rs22.65 billion in the following month.

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143 Percent Higher Fuel Costs On Its Own Dime

The power utility claimed in a petition that it charged a reference fuel cost rate of Rs16.88 per unit in May, which turned out to be Rs28.22 per unit and resulted in a gap of Rs11.34 per unit because of approximately 143 percent higher fuel costs on its own dime and 52 percent on account of the cost of purchasing power, which included costs for the national grid. 

According to the report, the price of RLNG climbed by 50% while the price of furnace oil increased by 38% from March to May. 

K-Electric’s Fuel Cost Variation Was Appropriate

In order to determine whether K-request Electric’s fuel cost variation was appropriate and if it adhered to the economic merit order when purchasing electricity from the national grid, its own power plants, and other external sources, Nepra has scheduled a public hearing for July 4. Once approved, K-Electric would be entitled to deduct Rs22.65 billion from customers’ August bills as payment for the FCA. 

According to an official statement, K-Electric’s modernization and digitization have raised concerns for Minister for Power Khurram Dastgir Khan, who also underlined that the firm needs to put more emphasis on service delivery and consumer convenience.

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