Inflated bills have inordinately affected those who are not wealthy or well-connected
The financial data would tell us if there is a corresponding spike in KE revenues, and more importantly, its cash flows in the months following July. For the past three years since 2013, in the half year period from July to December, the company’s ratio of revenues to units of electricity available for sale (not including line losses), has been Rs12.13, 12.25 and 11.44 respectively.
This number would be at the heart of determining the present price of the company.
The outlook on this ratio over the next 25 years or so would also factor significantly when calculating future revenues.
The framework for lifting revenues in the future is complicated, involving numerous calculations from what is called the “clawback mechanism” to the composition of “pass through” items in the tariff.
But raw revenue for each unit of power available for sale tells you where exactly the company is standing right now.
To lift this number, you could raise revenue, or shrink losses, ensuring that more power is able to reach high recovery areas.
KE has already ensured that most of its high-recovery areas have zero load shedding.
The remaining power has to go to medium or high-loss areas, and increasing recoveries in these zones has been a persistent challenge.
KE entered profitability for the first time in 2012 after decades of running in loss. Last year it boasted of a profit of Rs28 billion, a remarkable achievement considering in 2010 it ran a loss of Rs14.6 billion.
But in order get here, the company has squeezed out every ounce of value that there was within its operation. It has prepaid all its expensive debt and replaced it with cheaper Sukkuk certificates issued in 2014.
It has reduced its average cost of borrowing by 2 percent in the same period. It has improved recoveries by prioritising those customers who are in the highest cost slab — elite residential and industrial consumers who enjoy uninterrupted electricity.
It has tried pursuing power theft in high-loss areas, and even risked a messy confrontation with a few public sector clients such as the Karachi Water and Sewerage Board (KWSB).
The challenge for the new sponsors will be to find a way to continue on this path of rising profitability given that much of the value in the company has already been unlocked.
For the long run, this means strategic investments that change the landscape of power generation and distribution.
But for the short run surge of revenue in the run up to the sale, one answer could come from an increasing reliance on discretionary powers.
If you look at your power bill, you’ll notice it is made up in two sections.
From the top down, the first half consists of items like fixed charges, variable charges, metre rent, and a miscellaneous clutch of duties, taxes, TV license fee and bank charges. These total up to the line that reads net amount of current bill.
This section is largely fixed as per rules. Your metre determines how much you can be charged for power consumed, and most other items are calculated as a percentage of this. There is little to no room for discretionary charges to be applied here.
Below this are the arrears, instalment amount, and late payment surcharge rows. This section provides vast scope for discretionary charges. If the team at your IBC determines that you have been using a kunda, or your metre has malfunctioned, they will issue a “detection bill”, and arbitrarily add an amount under arrears, and decide what instalment you must pay in the current bill.
How do they decide if there is metre malfunction or theft?
In some cases, it is fairly straightforward. An inspection team might see a line going into your house. They could see some air conditioners in your house while your bills are far too low to account for them. There could be irregular usage patterns from one month to the next. If you argue that your premises were unoccupied during that time, they can ask you to produce your gas bill, which ought to also be zero for the same time (in reality this is rarely the case; most gas bills are not produced after a metre reading).
During the hearings at the Ombudsman’s office, there were many cases in which the charges were reversed due to an inability on the part of KE representatives to explain why they had been applied in the first place.
They alleged kunda use, but when the client denied this, the conversation ended. In two cases, the complainant was a no show, and one of those had only paid two bills in the past 39 months.
In those cases the officer conducting the hearing did not accommodate the complaint.
But for those who had been paying their bill regularly, only to find a large amount suddenly appear as arrears, the officer usually ruled in favour of the complainant.
The argument can drag on for months. Abdul Matlib, mentioned above, claimed to have visited KE offices up to three times a month for three months following up on his complaint.
For complaints involving one lac rupees or more, there is an even longer process, since the Ombudsman first sends the complaint back to KE for deliberation by an internal committee, and gives them an additional 31 days to revert with a response.
In meantime, instalments on the amount billed still have to be paid. Automatically, the amount being recovered from many of these complainants could be doubled or tripled using this discretionary authority, and the power to tack on arrears onto a bill rest with the bill collecting machinery at the IBC which is given targets for units to be billed for their area that they have to meet.
Has KE management raised the targets for recoveries from their respective IBC, particularly in high loss areas of the city, in the run up to the sale?
Giving lower staff in the billing machinery the discretionary authority to tack on arrears to a consumer’s bill, then placing targets on them is a recipe for trouble.
The staff is likely to calculate that most of the consumers will not put up a fight and simply accept the offer to pay a portion of the arrears billed to them in return for peace of mind.
Closing this discretionary gap is crucial to ensuring that future improvements in the running of KE, or any of the other power distribution companies in the country for that matter, are not brought about at the cost of those consumers who are paying their bills with dignity.
Meanwhile, for Irfanullah, the student from Chitral, and his roommates, these big numbers don’t matter.
The only number they are interested in is the one reflected on their bill next to the heading “arrears”. They don’t know where that number came from.
The amount shown there is equal to more than four years worth of their consumption.
Them, and the untold others like them, will now fight the thousand little battles that the ordinary folks in this city fight on a daily basis, and the small modicum of relief they might get from the Ombudsman is really all the justice they are asking for.
The writer is a member of staff. He tweets @KhurramHusain
Clarification: With reference to the story by Khurram Hussain (EOS, Jan 22). All billing is done as per regulatory processes and guidelines. Bills are generated as per consumer’s meter reading. In cases where theft, meter tampering or illegal abstraction is detected, the billing is done based on prescribed regulatory guidelines.
The process of such billing is fully covered in the Nepra guidelines and is determined accordingly. The utility has also ensured that all avenues are available to customers in case of any dispute. K-Electric is part of the sessions held at the office of the Federal Ombudsman.
The documentary evidence collected at the time of assessment is included in the proceedings. In the past six months, 79pc of rulings by the Federal Ombudsman have been in favour of K-Electric.
Moreover, in 2016, K-Electric partnered with the office of the Federal Ombudsman to establish a one-of-its-kind electronic communication network between FO Secretariat and K-Electric to ensure quick disposal of consumer complaints.
In line with the utility’s mission statement to put consumers at the heart of everything it does, K-Electric offers a wide range of avenues to address consumer requests ranging from 29 Integrated Business Centres spread across its network, one of the largest call centres equipped with leading consumer experience platform ‘Genesys’, centralised handling via KE website, facilitation at consumers’ doorstep with vans and round-the-clock engagement via social media forums, including public holidays.
Moreover, KE is also one of the first utility companies to implement SAP IS-U, a state of the art customer relations and billing management system.
The overall drive against power theft and illegal abstraction remains a key priority for the company and has played a critical role in bringing transmission and distribution losses down to as low as 22pc from 36pc in 2009.
This has resulted in exemption of 61pc of Karachi from loadshedding and provision of uninterrupted power supply to industrial zones — Spokesman, K-Electric
Published in Dawn, Sunday Magazine, January 22nd, 2017