ISLAMABAD – Despite concerns and strong opposition from the federal government and other stakeholders, the National Electric Power Regulatory Authority (NEPRA) has once again approved a dollar-based return on equity for K-Electric (KE)’s distribution and transmission business under the MYT 2024–30.
Similarly, the NEPRA has also allowed the KE an average tariff of Rs3.31 per unit for its distribution business, whereas for the transmission services, the company has been allowed Rs1,348.66/kW/month for FY 2023-24 under the seven year MYT 2024-30.
In its petition for determination of distribution tariff for a period of seven years from the FY 2023-24 to FY 2029-30, the KE had requested an average tariff of Rs3.8357 per unit, while for the transmission tariff the utility had sought Rs2.9871/unit, said NEPRA in its two separate decisions on the KE’s petitions for the determination of distribution and transmission tariff for a period of seven years from the FY 2023-24 to FY 2029-30.
For the distribution business, the authority has worked out revenue requirement of Rs50.284 billion for the FY 2023-24 or Rs3.31 per unit; while for the transmission business, the KE was allowed to charge its consumers Rs1,348.66/kW/month “Use of system charge” (UOSC) for the FY 2023-24.
K-Electric has requested a Return on Equity of 16.67 percent for its distribution business and 15 percent in US dollars for its transmission business, alongwith indexation to account for exchange rate fluctuations between the rupee and the US dollar. This request for a dollar-based return on equity was strongly opposed by the Ministry of Energy and other stakeholders.
The MOE in its written comments submitted that USD based RoE on regulatory assets is unjustified. The RoE needs to be aligned with similar businesses in the country’s power sector and de-linked from the USD. The RoE for the transmission and distributions businesses should be aligned with returns allowed to NTDC and the public sector distribution companies (DISCOs).
Similarly, Arif Bilvani, during the hearing and in his written comments opposed the US dollar based return on equity by submitting that the petitioner is not an IPP which is allowed dollar based return with an indexation under a certain specific policy that does not cover the business of the petitioner. Abu Bakar Ismail, representing Amreli Steel also raised concerns over the request of KE to allow USD based return. However, ignoring all the concerns, the authority has decided to allow RoE of 14 percent (USD based) to KE for its distribution function and 12 percent for transmission business for the MYT 2024-30, which works out as 29.68 percent in PKR terms, for the FY 2023-24. Accordingly, the RoRBCoE of the petitioner based on 30 percent of the allowed RAB, for the FY 2023-24, has been worked out as Rs7,396 million for distribution function. The authority has decided to allow RoE of 12 percent (USD based), being reasonable, to KE for its transmission function for the MYT 2024-30. Accordingly, the RoRBCoE of the petitioner based on 30 percent of the allowed RAB, for the FY 2023-24, has been worked out as Rs10,278 million. “At the same time, the authority also understands that the government is actively pursuing privation of other utilities; therefore, the authority may review this approved RoE of 14 percent and 12 percent (USD based) downward, or convert it into PKR, keeping in view the returns (RoE) allowed to other DISCOs, once they are privatised,” the decision said.
On the issue of whether the request to allow adjustment of distribution loss target due to change in voltage wise sales mix is justified and what will be mechanism for such adjustment? NEPRA said that the authority has decided not to allow any such adjustment in line with the practice in vogue for XWDISCOs. However, the authority would consider this issue going forward across the sector for all DISCOs, once CTBCM becomes operational and after evaluating its impact.
Whether the requested debt to equity structure is justified? The suthority has decided to allow a debt to equity ratio of 70:30 to ICE for the MYT control period of seven years from FY 2023-24 to FY 2029-30.
