• Says regulator’s decisions go against interests of govt, consumers, taxpayers
• Officials say giving undue advantage to private utility undermines privatisation
ISLAMABAD: Expressing serious concerns over a series of recent determinations by Nepra favouring K-Electric, the government on Wednesday announced its decision to challenge them for being against the interests of the government, consumers and taxpayers.
In a rare public comment on regulatory decisions, Power Minister Awais Leghari said his ministry had serious concerns over recent decisions of the National Electric Power Regulatory Authority (Nepra), pertaining to not only tariff matters but also licences issued to K-Electric for generation, transmission, distribution, etc.
“The ministry has observed some serious concerns regarding Nepra’s multiple decisions about K-Electric’s licences for generation, transmission, distribution and supply. These decisions also touch upon the investment plan for the upcoming multi-year tariff period,” Mr Leghari said in a post on social media platform X (formerly Twitter).
“These rulings have significant long-term effects on consumer tariffs and the federal government’s subsidies within a uniform tariff regime,” he said. “The ministry is planning to review the recently issued determinations related to transmission, distribution and supply.”
Mr Leghari recalled that a reconsideration of the earlier generation tariff decision was awaiting Nepra’s attention for almost six months, which was submitted back in December 2024. “This delay poses serious financial implications for the power sector and its subsidies,” he said.
Informed sources said the Power Division had serious objections over a recovery loss benefit introduced by the power regulator in K-Electric’s base power supply tariff as well as the change in criteria for write-off claims for unrecoverable arrears.
Both mechanisms are viewed as contributing significantly to the rising cost of the tariff differential subsidy (TDS), paid out of taxpayers’ money through the federal budget — set at Rs260 billion for the current fiscal year.
The Power Division is believed to have started preparations for filing a “reconsideration request” before Nepra to contest a series of parameters in generation, transmission, distribution and supply tariffs and licences.
These sources said the Power Division was also dissatisfied with issues relating to depreciation, return on equity, investment plans and treatment of loans, and believed that interest payable by K-Electric to the financial institutions should have been treated as actual but appeared to be higher than justified in the tariff structure.
The sources said the government believed that the Karachi-based power utility had been provided with lucrative profits through these recent decisions — much higher than it deserved — and that private entities could not be supported through public subsidies.
The government insisted that private entities should be expected to flourish based on improved performance; otherwise, privatisation could not be expected to solve the prevailing conditions in the public sector.
“If certain areas are not addressed, they could negatively impact consumers and the regulatory environment potentially hindering Pakistan’s efforts to encourage private participation in the distribution sector,” the minister said.
On Tuesday, Nepra approved the base tariff for K-Electric at Rs40 per unit for fiscal year 2023-24, which is almost 40 per cent higher than even the national average tariff of about Rs28 per unit in FY24 for the 10 public sector power distribution companies (Discos).
The delta between the Discos’ average and K-Electric’s tariff is transferred to the taxpayers through the federal budget in the form of tariff differential subsidy.
In its determination, the regulator changed K-Electric’s tariff mechanism based on 100pc recovery of bills and instead allowed recovery losses in the tariff, starting from 6.75pc in FY24 and gradually declining to 3.5pc by FY30. Interestingly, the Discos’ tariff is still based on a 100pc recovery of bills.
Published in Dawn, May 29th, 2025
