KE, in its review motion had sought a tariff of Rs 15.57 per unit for sustainability of its operations but Nepra turned down the request and granted a tariff of Rs 12.07 per unit in its decision in March 2017. KE then filed a review motion seeking a further increase in the tariff. The regulator had determined average tariff for KE at Rs 12.77 per unit. Well-informed sources in the Power Division told Business Recorder that the regulator is expected to announce the order this week or in the coming week. A number of KE officials were seen in the corridors of Nepra after news of the expected decision filtered out.
The sources said KE tariff would remain the same and Nepra will provide a detailed reasoning for rejecting KEs reconsideration request which reportedly submitted exaggerated facts and figures.
According to sources, it is not the responsibility of the regulator to look at the profitability of the company, adding that the regulator has to ensure availability of electricity at cheap rates and efficient service delivery. In 2009, recovery was around 89 per cent which has come down to 87.6 per cent, which implies that the company''s performance has declined in terms of recovery instead of improving, the sources continued.
"The company has done nothing in seven years, so on what basis should the regulator provide relief to the private power sector which is ready to be sold to the next buyer", the sources asked. KE had sought indexation on foreign investment promised by the KE. The regulator argues at this juncture that there is no justification for indexation until the company invests practically and in that case indexation can be given in mid-term review.
The sources said the regulator which has gone through the entire figures submitted by the KE has concluded that the figures of cash shortfall were based on wrong assumptions. "It is a very strange argument submitted by KE that no financial institution is ready to lend to the company on the basis of its current balance sheet," the sources said and pointed out that the logic that when the company was a loss making entity banks provided loans but not when the company is in profit is flawed.
In October, Nepra had allowed 70 paisa per unit increase in the proposed seven-year tariff to facilitate the sale of majority stakes from Abraaj Capital to Shanghai Electric of China. The regulator determined average tariff for KE at Rs 12.77 per unit, up from Rs 12.07 allowed in March last year. The regulator also noted that KE had been allowed a 20.90 percent loss in the first year, 19.80 percent in second year, 18.75 percent third year, 17.76 percent fourth year, 16.80 percent fifth year, 15.95 percent sixth year and 15.36 percent in the seventh year.
The sources said Nepra would mention in its determination that Power Division did not plead the case before the Authority and just forwarded KE''s reconsideration request like a post office. The company will get 17 per cent return on equity.
The total number of KE''s Integrated Business Centres (IBC) are 28 of which recovery from 14 IBCs is 93 per cent which accounts for 74 per cent of Karachi. If the company improved recovery by only 0.5 per cent it would have been at 98 per cent. The recovery rate on the remaining 14 IBCs was 76 per cent, if the company invests in this, it will reach 90 per cent.