There was no noise. Just an air of calmness, and sense of satisfaction. The Karachi Electronics Dealers Association achieved what some of its counterparts in the area couldn’t. It became loadshed-exempt and celebrated this milestone in a room filled with area representatives and stakeholders last week.
It took Karachi two decades to move from 6% to over 80% loadshedding exemption in 2021 before massive increases in countrywide power tariffs across multiple rounds reversed the trend as the government moved to secure its bailout with the International Monetary Fund (IMF). The bailout was necessary and so were increases in power tariffs, analysts say, but both items came at the cost of sacrificing present consumption.
K-Electric (KE) – the power utility responsible for supplying electricity to Pakistan’s largest and most diverse city – still claims nearly 70% of its feeder network remains exempted from loadshedding. Its Multi-Year Tariff (MYT), very recently determined by the power regulator, is set to enable it to take the figure to over 90%, says its CEO Moonis Alvi while talking to journalists.
The progress has not come without struggle. Along the way, K-Electric has seen its offices attacked, staff manhandled, and criticism levelled, sometimes for the sake of serving political rhetoric but largely because of outages in what it calls theft-prone areas. A power struggle outside its offices is also threatening its progress and accusations are flying that its operational work has been hindered.
Still, the company has motored along as Karachi looks to become the ‘City of Lights’.
KE, like other power distribution companies (DISCOs), operates in a highly regulated environment. These utilities are not allowed to determine the price they charge their customers. Instead, the federal government decides electricity rates, and the slab/categories a customer falls in. Islamabad, in its attempt to use a uniform base tariff, also penalises areas that do well – in terms of recovery and reducing losses – against those who don’t deliver.
Additionally, over the years, electricity bills have become the go-to resource for the government to increase its tax revenue, finance its circular debt, and even collect surcharge to finance the circular debt its own DISCOs add to. An average residential or commercial bill can have up to 30% charges on top of electricity costs. This is part of a bigger problem facing Pakistan’s economy that has struggled to keep up as its expenditures ballooned and revenue failed to keep pace.
But power tariff and tax increases have not come in isolation. They are part of another bigger problem facing Pakistan – unutilized power, which is nearly two-thirds of total generation capacity.
In the State of the Industry Report 2024 published by the National Electric Power Regulatory Authority (NEPRA), the regulator admits that one of the biggest challenges facing the sector is the “currently underutilized generation capacity”.
“By the end of FY2023-24, Pakistan’s installed electric power generation capacity reached 45,888MW, including KE, while the average annual utilization during the same period was only 33.88%,” it said in the report.
In the same report, NEPRA also came down hard on the National Transmission and Despatch Company Limited (NTDC) over delay in completion of transmission projects as well as DISCOs for their “poor performance”. It also severely criticised the public sector of Pakistan’s power sector, noting that despite a significant share of the government, governance and efficiency issues as well as regulatory non-compliance are prevalent.
“In the public sector, many violations are ongoing, and the lack of adherence to regulatory decisions by public sector entities contributes to financial, technical, and regulatory indiscipline within the power sector. The recovery rate of fines is notably low,” NEPRA further stated in the report.
According to a report issued by the Ministry of Energy on circular debt, the amount of net losses incurred by state-owned DISCOs stood at nearly Rs393 billion during FY24, a massive dent on taxpayer money that has had to also contend with higher average inflation during this period.
“This is despite the fact that DISCOs have been allowed an investment amount of Rs163.1 billion for FY2023-24 to improve their network,” NEPRA stated.
Recent accusations
On the recovery side – the much-talked about topic these days – DISCOs (excluding KE) have averaged a recovery rate of 92.5% over the last five years (FY20 to FY24) while KE has a number of 93.6% to its name.
DISCOs are under the government with KE the only privatised entity in the bunch. Hence, its data is normally used as a separate benchmark. The latest accusation in a weekly publication claimed that KE’s recovery has “fallen sharply”, driven “largely by middle class and wealthier household consumers not paying their bills”.
Its analysis, taking into account a short time period, also excluded ToU customers that seems to have skewed the argument.
“Where are these customers located? It is not right to say that these are ‘wealthy household consumers’ without carrying out proper geographical analysis,” said Alvi when asked about the accusation during an interview.
“People assume that for consumption of over 400 units, it must be a big house. This is not true at all.
“When theft causes a customer to break the slab, challenges in recovery start. Yearly consumption needs to be looked at. Irregular billing needs to be looked at.”
Alvi stressed that billing is a stringent process, vetted by regulatory, compliance and internal audit.
“Had this compliance not been the case, our success rate against challenges cannot be explained.”
Alvi stressed that with inflation and higher tariffs, recovery is difficult to improve. However, as the government starts to stabilise power tariffs, recovery rates are also likely to see improvement.
“But the challenge is that we have an obligation to supply to everyone since we are the only power utility in the city. We have to provide electricity even if customers steal. Even if they don’t pay their bills, we have to supply.”
Alvi brought the conversation to the 300 feeders where losses are rampant, and which, data says, bring down recovery ratios from 95% to 90%.
“If the responsibility of recovery on these 300 feeders is taken from us, on the remaining 1,800 or so feeders, recovery can go beyond 95%. If we don’t achieve it, we will bear the loss.”
Contrary to the perception that KE has made massive profits, the company’s financial returns have remained modest.
Since privatisation, KE’s return on equity (RoE) has remained below 2%—substantially lower than international benchmarks for power utilities. Additionally, no dividends have been issued to shareholders over this entire period.
“This underscores the challenging operating and regulatory environment within which the company continues to function,” Alvi said.
Meanwhile, KE’s financial results for FY24 and FY25 have remained pending as the MYT for the control period of FY24 to FY30 had not been determined. They are due to be finalised now, though.
Many critics also argue that KE’s solution to rid itself of these ‘problematic’ feeders is the easy way out.
However, Alvi pointed out that KE, when it was privatised, had an aggregated technical and commercial loss – in which transmission, distribution and recovery are all incorporated – of a mammoth 43%. At the time, the average across Pakistan was around 30%.
“KE started from a place where the loss was nearly 1.5 times higher than the country’s. We have reduced to less than the country’s average now.
“Karachi has over 900 slums, expected to be around 1,300 now. It attracts people from all parts of Pakistan. And we are proud that Karachi welcomes them. But when they come in, slums are built, which we cannot regulate.”
Alvi’s argument makes the case that KE’s improvement has come on over 80% of Karachi’s area, but the remaining will need support. Support, experts say, is not coming.
Just this week, KE was served with a showcause over loadshedding on the basis of AT&C losses.
A few days prior to it, the energy ministry tried to block a relief of up to Rs 4.69 per unit on account of fuel charges adjustment (FCA), arguing that it disrupts the uniform tariff policy. Before it, Energy Minister Awais Leghari stated that the ministry would file a review of KE’s MYT, which was determined by NEPRA after extensive deliberations. Additionally, for over two years, Karachi and its adjoining areas – serviced by KE – have been paying an additional surcharge of Rs3.23 per unit for circular debt containment, a figure KE customers are not responsible for anyway.
An official, working with the government and speaking on condition of anonymity, said KE’s MYT was to set the stage for the privatisation of DISCOs. Now, the official said, the signal has turned red or at least yellow in some way after the energy ministry’s statement.
But this is not the entire spectrum of criticism on KE. It also faces the wrath of citizens residing in areas where loadshedding goes up to 10 hours a day.
Loadshedding duration, the company says, is directly related to the losses (amount of theft and defaults) of a particular feeder – a network that serves a high number of customers, some of which may still be honest. In simple words, loadshedding is implemented purely on a commercial basis.
Alvi said free electricity is not possible.
In its investment plan for 2030, KE said it is targeting a network that is more than 90% exempted from loadshedding. Alvi said KE cannot do it alone.
“It must be two-way traffic. We are bringing in technology to take loadshed to the PMT (transformer) level. We are actively working on the pilots. Results are expected soon.
“We are also working on flexi-payments to allow people to pay in a manner which suits their income cycle. Customers facilitation, technology, administrative control and vigilance are our action items including bringing political parties on board.”
But it promises to be a long fight.
“I have a clear vision for the next 15 years,” said the KE CEO, who has been at the helm for the last seven years.
“KE should be able to transmit and distribute reliable and sustainable electricity to the customer in a safe manner. We should have even better technical bandwidth to improve the system, and stay abreast with changes in international market to keep the system upgraded.
However, Alvi’s job has a double-edged sword.
KE’s profit will be seen as a negative by elements that want ‘free electricity’, while a loss would make stakeholders raise questions on financial sustainability.
Alvi was cognizant of this.
“You can do everything you can and still have unmet expectations. It is difficult to operate in societies that vilify profit-making. There is a dilemma where you are demonized for making money and persecuted if you think commercially. This needs to change. In the current scenario, privatisation is the key to reforms in the power sector, and efforts will need to be made to convince investors to show interest in DISCOs.”
However, Alvi said he was steadfast. “We will not cease our struggle to do the right thing.
“We have done a lot of good to change Karachi’s electricity landscape. I am afraid to imagine what the situation would have been like had privatisation not happened.”
In a World Bank’s ‘PAKISTAN FEDERALPUBLIC EXPENDITURE REVIEW 2023’, the lender said KE’s “privatization has resulted in savings of Rs900 billion for consumers and the government”.
Alvi admitted that challenges remain. “How do you explain to people that price is not under our control.
“You cannot steal basic necessities if you don’t have money. Somehow, the principle goes out the window with electricity.”
Copyright Business Recorder, 2025
