K-Electric Tariff Update: USD-Based Rates Set for All Three Divisions
SLAMABAD: In Seven months after securing dollarized tariff for generation business, the K-Electric (KEL) has also secured dollarized tariff for its transmission and distribution business for 7 years, i.e. from FY24 to FY30.
Distribution Business awarded USD ROE of 14%: NEPRA has awarded USD IRR of 14% to KEL for distribution business against requested USD IRR of 16.67%. The USD IRR of 14% translates into PKR ROE of 25.6% for Y1 (i.e. FY24). Which is better than previous tariff PKR return of 16.67%.
Transmission Business awarded USD ROE of 12%: NEPRA has awarded USD IRR of 12% to KEL for transmission business against requested USD IRR of 15%. The USD IRR of 12% translates into PKR ROE of 21.4% for Y1 (i.e. FY24). Which is better than previous tariff PKR return of 15%.
Generation Business Tariff previously awarded with 14% USD ROE: Previously, company also got generation tariff at USD ROE of 14% with take or pay structure. Which earlier was 17.56% PKR based ROE (15% PKR ROE and 2.56% for devaluation factor set in advance).
We view this as a positive development as ROE awarded for new control period (FY24-30) is significantly higher than previous control period tariff.
This current tariff is unbundled in 3 different segments, i.e. (1) Generation, (2) Transmission and (3) Distribution Tariff. Earlier, company use to have a single tariff for all business segments. We also released a separate note, when company was awarded with generation tariff dated Oct 23, 2024 titled “$ ROE and take or pay allowed”.
The PKR ROE is higher than USD ROE as company has indexed this return formula with base exchange rate assumed from FY16.
In Distribution business, Ministry of Energy (MoE) in its written comments mentioned that, granting USD ROE to KEL is unjustified. Furthermore that comment also mentioned recently allowed Rs ROE of 14.66% to Faisalabad Electric Supply Company (FESCO).
The regulator has also mentioned that this return formula of distribution business may be reviewed and aligned with other DISCOs once they are privatized.
