ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) has approved K-Electric’s request to recover unrecovered consumer bills through future tariffs. Starting with a recovery shortfall of 6.75% in 2023-24, this shortfall is set to decline gradually to 3.5% by 2029-30.
The National Electric Power Regulatory Authority (Nepra) has announced a significant shift in tariff policies for K-Electric (K-Electric), setting its base tariff at Rs40 per unit for fiscal year 2024 (FY24).
This tariff is approximately 40% higher than the Rs28 per unit projected for public sector distribution companies (Discos) in 2025-26, with the difference compensated through a tariff differential subsidy funded via the federal budget. Unlike Discos, which are still mandated to recover 100% of their bills, K-Electric is now permitted to recover a portion of its losses through tariffs, starting at 6.75% in FY24 and gradually decreasing over time.
Additionally, Nepra has mandated K-Electric to progressively increase its bill collection targets, aiming for a recovery rate of 96.5% by FY30. The Ministry of Energy, however, opposed the recovery loss allowance, suggesting a lower recovery ratio of around 96.7% and advocating benchmarking against more efficient Discos to prevent higher costs for consumers.
The FY24 tariff of Rs39.97 per unit encompasses costs for power purchase, transmission, distribution, and supply margins, with about half of the power sourced from the national grid. Financially, K-Electric’s total revenue requirement for FY24 is estimated at Rs606.92 billion, with recovery losses contributing significantly to the shortfall that the new policy aims to mitigate.
This decision marks a departure from previous regulations that did not permit recovery losses, highlighting a move toward more flexible tariff mechanisms. Nepra emphasized that without allowing recovery losses, K-Electric could face financial viability issues, potentially impacting service quality and systemic stability.
While Discos remain bound to 100% recovery, the government retains the authority to offset inefficiencies through surcharges—a mechanism not available to K-Electric—underscoring the evolving regulatory landscape for the utility sector.
