Karachi October 22 2024: NEPRA has reduced K-Electric generation power plants Return on Equity to 14 percent with a condition to reduce it further if IPPs agreed for downward revision with Government of Pakistan, according to Determination of the Authority in the matter of Tariff Petition filed bv K-Electric Limited for Power Generation Plants
In a positive development, the Authority has decided to approve the tariff on Take or Pay basis to the KE power plants on all fuels including HSD. The responsibility of fuel arrangement shall be on KE. In case KE is unable to make the plant available for dispatch due to any reason, including but not limited to non-availability of fuel, capacity payment shall not be allowed.
“K-Electric Limited would like to inform that the National Electric Power Regulatory Authority (NEPRA) has approved Generation tariff for all its power plants for the period post June 2023” states K-Electric in its filing to the exchange.
“KEL had applied to NEPRA for approval of Generation tariff of all its power plants for the period post June 2023, on December 01, 2022 in accordance with Rule 3(1) of NEPRA (Tariff Standards and Procedure) Rules, 1998. The Company is in the process of evaluating/reviewing the decision in detail and will exercise available remedies, if required, in accordance with the statutory provisions” states the notification.
The Authority has granted a ROE of 15% (USD-based) to KE for its generation power plants in the previous multi year tariff, a level that is consistent with comparable IPPs. This figure was established based on comprehensive benchmarking and financial analysis conducted at that time, while a re-evaluation could yield a higher figure given the prevailing economic conditions of the country.
The Authority acknowledges KE’s assertion that there has been no unilateral reduction in the ROE for IPPs. If KE had received a tariff covering the full operational life of its plants in the last multiyear tariff, the allowed ROE would have remained at 15% (USD-based), aligning with the treatment of other IPPs.
“Nonetheless, the Authority, acknowledging that the plants within KE’s fleet are already established and operational, has decided to approve the ROE at 14% (USD-based). This approved ROE will apply during the respective control periods established for each power plant in this determination. Furthermore, the Authority can adjust this approved ROE downward if a reduction occurs for IPPs that have entered into agreements with the Government of Pakistan” states the notification.
