Industries warn of shutdowns as K-Electric tariff disputes linger

ISLAMABAD: Representatives from Karachi’s industrial sector have called on the power regulator to resolve pending adjustment claims involving K-Electric, warning that prolonged uncertainty is forcing businesses to either shut down operations or relocate outside the city.

The concerns were raised during a public hearing held on Tuesday by National Electric Power Regulatory Authority regarding end-of-term adjustments linked to KE’s Multi-Year Tariff (MYT) for the 2017–2023 period.

During the proceedings, KE Senior Director Finance Ayaz Jaffer outlined the utility’s stance on several adjustment requests, including issues related to working capital, tax treatment, subsidies and write-off claims.

One of the major matters discussed was a positive working capital adjustment of Rs28 billion up to 2023. KE argued that it should be allowed to recover nearly Rs43 billion, including outstanding write-off claims that remain unpaid.

According to the utility, the adjustment mechanism had already been incorporated into Nepra’s MYT determination for FY17–FY23 and reaffirmed during the mid-term review process. The framework allowed certain financial components to be evaluated at the end of the control period through a predefined regulatory process.

KE informed the authority that its cumulative end-of-term adjustment claims stood at Rs43.6 billion. The amount includes the impact of currency exchange fluctuations on the approved Return on Equity (RoE), investment-related adjustments and working capital calculations based on actual financial balances compared to projected benchmarks under the MYT model.

The company also requested approval for pass-through claims tied to taxes paid under the tariff framework, maintaining that all claims had been submitted in line with Nepra-approved methodologies and regulations.

Industry stakeholders argued that delays in resolving the matter had created uncertainty within Karachi’s business community and damaged investor confidence. One participant warned that several industrial units within KE’s service territory were either converting into warehouses or moving operations elsewhere.

Speakers at the hearing emphasised the need for a balanced solution that would protect consumers from excessive financial burden while ensuring the utility’s financial stability.

Intervener Rehan Javed said Karachi’s industrial and export sectors remained heavily reliant on KE’s electricity supply, adding that the challenges faced by the privatised utility differed from those of state-run distribution companies.

He stressed that while consumers should not face unnecessary charges, weakening the city’s only electricity supplier would also have serious economic consequences.

Participants further noted that the handling of KE’s case would influence future privatisation efforts in Pakistan’s power sector. They argued that investor confidence would suffer if financial disputes remained unresolved, discouraging private investment in other distribution companies.

Another intervener, Arif Bilwani, questioned how long Karachi residents and businesses would continue facing such disputes, saying industries were losing valuable time in prolonged legal and regulatory battles instead of focusing on economic activity.

Meanwhile, Tanveer Barry pointed out that Karachi consumers were already paying an additional surcharge of Rs3.23 per unit and should not be burdened with further costs.