MYT for K-Electric : Nepra Cuts average tariff cut by Rs2.83

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Karachi : NEPRA has approved a Multi-Year Tariff (MYT) for Karachi Electric Ltd (KEL) for a period of 7 years (starting July’16) as against 10 years, demanded by the management.

The new tariff has been approved at PKR12.8/KWH, 6% higher than the tariff finalized earlier (at PKR12.1/KWH).

The tariff still falls short of the previous tariff of PKR15.6/KWH and the review petition tariff filed by KEL @ PKR16.1/KWH. A cost-plus mechanism has been finalized as against the performance based tariff which expired in June’16.

k-electricEarlier, the tariff encouraged the utility to invest in its infrastructure by allowing it to pocket the efficiency gains. However, the new tariff mandates KE to adhere to its investment plan (given at the start of the tariff control period) and deviations from the investment program will result in penalties.

Asset based return (similar to SSGC and SNGP) has been finalized as opposed to equity based return structure (similar to IPPs) that was approved back in FY09.

The cost of projects has been revised upwards from PKR238bn to PKR299bn, taking into account higher cost of borrowing owing to cost of debt, as KE had requested, for allowing additional Sinosure fee of 1.8% by claiming that most of its funding out of PKR330 billion will be through Chinese financing and also requested for an increase in hedging cost from allowed 5.5% to 7.1%.

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The issue of lower collection than projected levels built in to the tariff for calculation of claw-back mechanism remains intact where the utility will be penalized if actual collection falls below the mandated levels.

A slight revision in T&D losses has also been made in the new tariff structure where on the recommendations of creditors, the regulator has allowed a slightly higher T&D Losses curve than was allowed to the utility earlier.

Source : Web desk

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