ISLAMABAD: Traders from Karachi have opposed the Rs3.09 per unit additional fuel cost adjustment (FCA) demanded by K-Electric, saying it would put them at a competitive disadvantage compared to the rest of the country.

The traders pleaded this on Thursday during National Elec­tric Power Regulatory Autho­rity’s (Nepra) public hearing on KE’s request for permission to extract Rs6.2bn from its consumers for electricity used in July.

The businesspersons, traders and political representatives from the city said the FCA for other ex-Wapda distribution companies was estimated to be negative Rs0.31 for July, the same month for which the power utility company was seeking an FCA of Rs3.09 per unit.

They said that since the government had applied uniform base tariff throughout the country and the difference was met through tariff differential subsidy, a higher FCA for Karachi would put business and industrial activities at a disadvantage.

Claim extra charges would put metropolis’ industry at competitive disadvantage

It would also encourage the relocation of industries to other parts of the country, particularly Punjab.

They were also almost unanimous that KE’s FCA should be frozen at around Rs1 per unit and defer the remaining part till the multi-year tariff for the utility company was determined and notified.

National Electric Power Regu­latory Authority Chairman Wase­­em Mukhar, however, said the ex-Wapda Discos’s FCA for July turned out to be negative because the regulator had increased their base tariff, while KE’s multi-year tariff was in the process of being finalised.

The political and business leaders who appeared in the public hearing included Korangi Association of Trade and Industry’s Rehan Javed, Karachi Chamber of Commerce and Industry’s Tanveer Bari, industrialist Arif Bilwani, former KE executive Anil Mumtaz and Jamaat-i-Islami’s Imran Shahid.

They demanded that KE’s inefficient plants, which had an average fuel cost of Rs28 per unit, should be closed.

In their place, they demanded that surplus electricity from the national grid — at Rs9.04 per unit — should be diverted to Karachi, which would not only help the KE but also reduce the burden on consumers across the country who are paying for the capacity charges.

They also demanded heat rate tests of KE’s plants and criticised the government and the regulator for allowing the company’s old plants to remain in operation through repeated extensions and modifications even though their designed life had expired 15 to 16 years ago.

The participants also questioned the justification for Discos’ privatisation based on the same experience as KE.

Mr Bari of KCCI said consumers were paying for KE’s inefficient plants and a Rs33bn incremental package given to Discos’ consumers last year was not yet transferred to Karachi’s industrial consumers.

Nepra had recently allowed KE to charge an additional FCA of Rs2.59 and Rs3.168 per kwh for electricity consumed in May and June, respectively, through the billing months of October and November 2024.

FCAs are incurred by power utilities due to global variations in fuel prices and changes in the electricity generation mix.

The higher FCA is applicable to all consumer categories except, lifeline power consumers and protected domestic consumers — using up to 300 units — agricultural consumers and electric vehicle charging stations.

The adjustment on account of monthly FCA is also applicable to domestic consumers having Time of Use (ToU) meters, irrespective of their consumption.

Under the tariff mechanism, changes in fuel cost are passed on to consumers on a monthly basis through an automatic mechanism while quarterly tariff adjustments on account of variation in the power purchase price, capacity charges, variable operation and maintenance costs, use of system charges and including impact of transmission and distribution losses are built in the base tariff by the federal government.

Published in Dawn, August 30th, 2024

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

IMF hopes
Updated 14 Sep, 2024

IMF hopes

Burdening taxpayers, both corporate and individual, with additional revenue measures is not how crisis-hit nations break out of the debt trap.
Media unity
14 Sep, 2024

Media unity

IN recent years, media owners and senior decision-makers in newsrooms across the country have found themselves in...
Grim example
Updated 14 Sep, 2024

Grim example

The state, as well as the ulema, must reiterate the fact that no one can be allowed to play executioner in blasphemy cases.
Monetary easing
Updated 13 Sep, 2024

Monetary easing

The fresh rate cut shows SBP's confidence over recent economic stability amid hopes of IMF Board approving new bailout.
Troubled waters
13 Sep, 2024

Troubled waters

THE proposed contentious amendments to the Irsa Act have stirred up quite a few emotions in Sindh. Balochistan, too,...
Deceptive records
13 Sep, 2024

Deceptive records

IN a post-pandemic world, we should know better than to tamper with grave public health issues, particularly fudging...