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ISLAMABAD - Despite worst performance, ownership of 90 percent complaints of power sector and slump in oil prices, since 2008, Nepra has allowed K-electric to double its power tariff.

In 2008, when the oil prices were higher, the Nepra determined tariff for K-Electric was around Rs7.14 per unit, while in 2016, when oil price was substantially lowered, the Nepra determined tariff for K-Electric had risen to almost double, said a letter send by the Ministry of Water and Power to Nepra.

The Ministry of Water and Power in its earlier communication with Nepra, on January 26, alleged that during the previous few years more than Rs62 billion had been over-billed to K-Electric consumers and demanded Nepra to take action against all those involved in the matter. The letter also accused Nepra of discriminating the consumers of Karachi and sowing the seed of discord.

Following the ministry’s allegation, Nepra had constituted a committee to look into the allegations and to submit its finding within a week. On February 4, in the light of the committee findings, Nepra replied to the Ministry of Water and Power and rejected all the allegations made by the ministry.

The war of words become more intensive when in response to Nepra’s letter of February 4, which was released to some selective media outlets, Ministry of Water wrote a detailed two page letter to Nepra and released its to the entire media.

According to the letter, “Ministry of Water and Power in its early communication had not sought a response to the issues highlighter therein, instead it was expected that NEPRA account for the deficiencies, inaccuracies and anomalies identified in the upcoming tariff determination of K-electric. Surprisingly, however, Nepra’s first reaction was to give K-electric a clean chit on its own earlier finding of 2014 that K-electric was overbilling consumers.”

“This was followed by a long-drawn explanation amounting to an admission that NEPRA has not fulfilled its regulatory responsibility towards the KE consumers in financial years 2015 and 2016 by delaying the decision for almost two years, despite having had adequate opportunity in around eight quarterly adjustments,” the letter said.

“Instead of addressing the core defects identified in the KE tariff determination, Nepra has attempted to take refuge behind ‘national interest’ which would have been better served if Nepra had provided timely relief to KE consumers, instead of ensuring that massive profits are posted to KE’s financials for two years, thereby making recovery of this amount difficult,” the letter added. “If highlighted this issue amounts to a conspiracy against Nepra’s credibility, then its rests only on the undisputed evidence of collusion at the cost of the one of the country largest electricity consumers bases in the country. The so-called ‘seeds of discord’ are also sown when the regulator turns a blind eye towards the interests of consumers of a particular area, and national harmony would in any case be better served if highlighted issues were to be addressed to provide judicious relief to people across the country,” the letter added.

“Had the KE consumers been treated with equity and provided relief by Nepra, more than 18,000 complaints would have been filed with Federal Ombudsman, making it about 90 percent of the complaints on power sector from all over the country,” the ministry alleged.

In 2008, when the oil prices were higher, the NEPRA determined tariff for K-electric was around Rs7.14 per unit, while in 2016, when oil price was substantially lowered, the NEPRA determined tariff for K-Electric had risen to almost double. Even if other costs associated with the tariff have increased, this is by any standards a legally and financially unjustifiable and disproportionate increase in tariff. It is thus clear that the upside in tariff has been generously allowed while no regulatory was undertaken for reduction in favour consumers when due, the letter explained.

Moreover, when a Multi-Year Tariff (MYT) regime requires the tariff fundamentals are to be kept unchanged, it is unclear why a revaluation of assets by KE has been allowed thereby giving room to KE to keep its return-on-assets lower than the level where these profits would be passed on to consumers through a tariff reduction. Further, if, as claimed, the MYT regime is a performance based regime, how could KE’s failure to meet the target of 15 percent Transmission and Distribution (T&D) be rewarded by allowing higher profits.

Similarly, there was inadequate accountability of KE for its disastrous performance during the heat wave of 2015 and 2016, which was sufficient evidence of inadequacy of system improvements, despite Nepra’s admitted leniency to KE for allegedly enabling investment in the improvement of KE’s systems.

The ministry further maintained that since “Nepra has the statutory mandate to determine a tariff to the exclusion of all others as per section 7 and 31 of the NEPRA act, 1997, it would be pertinent of Nepra to ensure that it undertakes its responsibility in an impartial, fair and non partisan manner, within the parameters of the legislative framework which governs its functioning. Therefore, even though from its response NEPRA appears to have every intention of continuing with a biased regulatory attitude in favour of K-electric, the provision of section 7(6) of the regulation of generation, transmission and distribution of electric power act, 1997, cannot be ignored in so far as it explicitly mandates Nepra to “protect the interests of consumers and companies providing electric power services in accordance with guidelines, not inconsistent with the provisions of this Act, laid down by the federal government.” This provision specifically requires Nepra to maintain a balance between the interests of the consumers and companies instead of allowing one sided favours to companies at the expense of consumers,” it added.

The letter asked Nepra that necessary steps should be taken to ensure that in the pending MYT determination for KE consumers, KE’s failure in achievements of targets in the past ten years by the company should not be borne by its consumers in coming years. “The benefits of claw back mechanism, which has been delayed since 2014, also need to be determined at the earliest possible, so that consumers are rightfully given their lawful and overdue benefit in electricity invoices,” the letter concluded.