ISLAMABAD: K-Electric (KE) customers will see a reduction of Rs0.27 per unit in electricity rates for October 2024 under the Fuel Charge Adjustment (FCA) mechanism. This follows a Rs0.17 per unit reduction in September, offering some financial respite to Karachi residents.
During a public hearing held by the National Electric Power Regulatory Authority (Nepra), KE’s proposed FCA adjustment sparked debate about electricity costs and production efficiency. Nepra officials presented data showing that KE customers have historically paid lower FCA rates compared to other power distribution companies (XWDISCOs).
In 2022, KE’s FCA stood at Rs3.62 per unit, lower than XWDISCOs’ Rs4.41 per unit. In 2023, KE customers benefited from a negative FCA of Rs2 per unit, while XWDISCOs charged Rs0.90 per unit. For 2024, KE’s FCA rate was Rs1.37 per unit versus XWDISCOs’ Rs2.92 per unit. However, in FY25 so far, XWDISCOs have managed lower FCA rates than KE.
Efficiency and Fuel Cost Debates
Critics at the hearing raised concerns about KE’s adherence to the Economic Merit Order and its reliance on expensive resources. KE officials defended their strategy, citing a focus on efficient RLNG-based plants like BQPS-2 and BQPS-3 while reducing furnace oil usage. They attributed the proposed FCA reduction to falling international fuel prices and improved generation efficiency.
KE clarified that power drawn from the national grid remained consistent with the reference month. They assured Nepra of regular compliance reports verifying adherence to cost-effective generation practices.
Multi-Year Tariff Challenges
Another key issue discussed was KE’s Multi-Year Tariff (MYT), which expired in 2023 and awaits regulatory approval. Without an updated MYT, KE’s FCA adjustments rely on older reference pricing. Nepra officials noted that approving a new MYT would help KE align its pricing mechanisms more closely with XWDISCOs.
Broader FCA Adjustments
Nepra recently approved a negative Rs1.14 per unit FCA adjustment for XWDISCOs for October 2024, to be reflected in December bills. However, categories like lifeline users, domestic consumers using up to 300 units, and EV charging stations are excluded from this relief.
Nepra has reserved its decision on KE’s FCA adjustment, with a final announcement expected soon. If approved, KE customers could see further reductions in their electricity bills, offering much-needed relief amid ongoing economic challenges.
Story by Zafar Bhutta
