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Karachi: The National Electric Power Regulatory Authority (NEPRA) has approved new transmission and distribution tariffs for K-Electric, spanning a control period of seven years from fiscal year 2024 to 2030. This decision aligns the implementation of K-Electric’s investment plan with the tariff structure, aiming to provide predictability and stability for the utility.
NEPRA has sanctioned an average distribution tariff of PkR3.31 per kWh for fiscal year 2024. Additionally, the authority has permitted a US dollar-based Return on Equity (RoE) of 14%, translating to 29.68% in Pakistani Rupee terms, while allowing a cost of debt at 24.37% for the same period.
K-Electric’s Return on Regulatory Asset Base – Cost of Equity (RoRBCoE) has been calculated at PkR7.4 billion for fiscal year 2024, based on 30% of the allowed Regulatory Asset Base (RAB), which amounts to PkR86.4 billion. The utility has been allowed a Debt:Equity ratio of 70:30 for RoRB calculations.
The authority has outlined provisions for transmission and distribution losses, allowing for adjustments based on target achievements. Any profits exceeding benchmarks will be shared with consumers, whereas losses will not be transferred to them.
Operating and maintenance costs for K-Electric have been set at PkR26.0 billion against a request of PkR30.1 billion, excluding CAPEX nature costs. Depreciation charges are pegged at PkR8.8 billion, subject to future adjustments based on audited accounts.
NEPRA has determined a negative working capital requirement of PkR1.3 billion against K-Electric’s demand for a positive figure. Corporate tax and costs associated with Workers’ Welfare Fund (WWF) and Workers’ Profit Participation Fund (WPPF) will be treated as pass-throughs, with potential reversals pending discussions with other power entities.
System use charges have been approved at PkR1,348.66 per kW/month, based on 2,684 units sold in fiscal year 2024. The transmission RoE is set at 12% in US dollar terms, equating to 24.46% in Rupee terms, with a local cost of debt at 24.28%.
The approved tariffs are estimated to impact K-Electric’s bottom line by approximately PkR46.7 billion annually, excluding principal debt payments. However, any transmission and distribution losses above the set thresholds could negatively affect profitability. K-Electric recorded aggregate technical and commercial losses of 23.1% in fiscal year 2024, including 16.0% in transmission and distribution losses.