The Power Division has recently admitted to making a major blunder regarding the imposition of a surcharge on the consumers of K-Electric (KE) for an approved tariff increase. In a public hearing, the division confessed that the plea for a surcharge of Rs1.52 per unit on KE consumers was in error and required rectification.
Waseem Mukhtar, the newly appointed chairman of the National Electric Power Regulatory Authority (Nepra), presided over the hearing. Mukhtar, who had previously advocated for power tariff increases as part of his official duties, reserved his judgment pending written statements from relevant ministries of the federal government.
The Power Division had initially requested the additional surcharge to generate approximately Rs25 billion from KE consumers over a 12-month period. This additional charge would be in addition to the average Rs30 per unit national base tariff, Rs3.23 per unit financing cost surcharge, and various taxes and duties, as well as quarterly and monthly tariff adjustments and fuel cost adjustments.
During the hearing, Mr. Mukhtar and other members of Nepra raised legal concerns about the petition seeking a surcharge of Rs1.52 per unit on all KE consumers. The Power Division team, led by Joint Secretary Mahfooz Bhatti, reluctantly admitted that there was a major flaw in the petition. They acknowledged that while the intention was to exempt lifeline consumers from the surcharge, the documents submitted to the ECC and the Cabinet included provisions for the surcharge on lifeline consumers as well.
Nepra members questioned the contradictory position and the legality of the verbal statements made by the Power Division team. The team claimed that the surcharge for lifeline consumers was approved by mistake and would be withdrawn. However, Nepra members expressed concerns about the officials having the power to withdraw cabinet decisions. The Power Division team assured that an amendment would be secured from the cabinet.
Consumer representatives, particularly those from Karachi’s chambers and business associations, demanded that the petition be dismissed due to the mistake made by the Power Division.
Nepra Member Tariff Rafique Shaikh stated that the case would need to be reheard due to the conflicting positions of the Power Division and the cabinet decision.
Additionally, Nepra members pointed out that the surcharge was not within the government’s powers, as it did not align with the criteria for imposing surcharges, such as infrastructure development or the government’s financial responsibility.
The Power Division reported that the average tariff determined by Nepra for KE was Rs43.04 per unit, while the applicable tariff was Rs32.23 per unit. With the proposed surcharge, the average applicable tariff for KE would be Rs33.75 per unit.
It was also revealed that KE consumers owed approximately Rs175 billion in outstanding payments for quarterly adjustments from 2019 to 2022. However, only Rs24.5 billion was being advocated for the imposition of the surcharge. It was acknowledged that initial tariff increases result in lower recoveries but gradually improve over time.
To clarify the situation, the chairman of Nepra stated that the regulator would seek written clarification from the Ministry of Finance. Additionally, he agreed to address the issue of multiple taxes on electricity bills in the relevant forums.
Last month, the federal cabinet approved the surcharge and instructed the Power Division to complete the legal requirements for its collection from all KE consumers.