The government on Monday hailed the National Electric Power Regulatory Authority’s (Nepra) recent decision to slash K-Electric’s multi-year tariff, saying it will reduce the “additional burden on taxpayers” and that the move was not against the interests of Karachi’s power consumers.
Last week, Nepra reduced KE’s multi-year tariff for the fiscal year 2023-24 by Rs7.6 per unit, from Rs39.97 to Rs32.37. KE warned that the move will have “far-reaching consequences for its stakeholders, including consumers”.
Shares of KE, Pakistan’s only privatised and foreign-owned electricity utility, plunged on the stock exchange following the tariff cut, as investors sold heavily. According to a Dawn report, KE’s foreign owners are threatening to take the government to an international litigation forum. Analysts have warned that the tariff revision and regulatory uncertainty could hurt the company’s finances.
In a subsequent statement today, the Ministry of Energy’s Power Division termed those opinions a “malicious campaign”.
It said certain elements were unfortunately presenting the Nepra decision in a “distorted and misleading manner, attempting to create the false impression that the decision is against the interests of electricity consumers in Karachi”.
“The reality is exactly the opposite,” the Power Division asserted.
The Power Division spokesperson clarified that Nepra’s review in this matter was primarily related to KE’s administrative and operational affairs.
The statement read: “As a result of Nepra’s decision, the additional burden on taxpayers will be reduced, and K-Electric will be incentivised to cut losses instead of passing them on.
“Previously, due to inefficiencies, K-Electric was effectively compensated with billions of rupees in subsidies, financed through the national budget. This revised determination will help reduce that unnecessary annual fiscal burden.”
The Power Division highlighted that the regulator’s review “removes the unfair disparity” that existed between KE and public-sector distribution companies (Discos).
“K-Electric must now undertake administrative reforms and demonstrate operational improvement to control its inefficiencies. There is no risk of load-shedding in Karachi arising from the retirement of loss-making or idle generation plants, because cheaper and sufficient electricity is already available in the national grid, and the infrastructure to deliver this power to Karachi consumers is in place,” the statement assured citizens.
K-Electric Limited’s per share value declined from Rs7.7 on October 16 to Rs5.62 on October 24. As of 3:40pm today, the value has risen by 3.74 per cent since yesterday, Pakistan Stock Exchange’s data portal showed.
The tariff cut
On May 27, Nepra had approved KE’s request to incorporate unrecovered bills into its consumer tariff. It set KE’s base tariff at Rs39.97 per unit for FY2023-24, which was almost 40pc higher than even the national average tariff of about Rs28 per unit in 2025-26 for the 10 public sector Discos in the country.
The next day, the Power Division announced its decision to challenge the Nepra determinations for being against the interests of the government, consumers and taxpayers.
Last week, on a set of review motions filed by the Ministry of Energy and others concerning KE’s multi-year tariff (MYT) determinations for the control period of FY2024-30, Nepra reduced the utility’s tariff by Rs7.6 per unit, effectively overturning its own May determination made after more than two years of public hearings.
KE criticised the Nepra move, saying it was “not sustainable for the company and will have far-reaching consequences for its stakeholders, including consumers”.
However, the utility clarified that the Nepra announcement by the regulator did not apply to customers and, therefore, there would be no change or reduction in monthly bills for power consumers.
More to follow
