ISLAMABAD: Dealing a major financial blow to K-Electric (KE), the National Electric Power Regulatory Authority (Nepra) has slashed the utility’s multi-year base tariff from Rs39.97 to Rs32 per unit, The News reported on Tuesday.
The decision came after a review of the government’s petition challenging Nepra’s earlier determination.
Rs50 Billion Write-Off Rejection Upheld
Despite the tariff reduction, Nepra upheld its previous stance on key matters, rejecting the government’s plea to disallow KE’s Rs50 billion write-off claims.
“The petitioners have failed to convince the Authority to bring desired alteration or review; thus, the review motions are accordingly dismissed,” Nepra stated in its decision.
From Tariff Hike to Sharp Cut
This revision marks a sharp reversal from Nepra’s May 27, 2025 determination, which had raised KE’s average base tariff by Rs6.15 per unit (18.18%) to Rs39.97 per unit for FY2023-24.
That hike was later formalized through a July 18, 2025 notification, covering supply, distribution, and transmission operations through FY2030.
Power Division’s Challenge and Hearings
The Power Division challenged the earlier tariff decision, filing a review petition before Nepra.
The regulator held closed-door hearings on the matter before announcing the new determination.
However, the new tariff decision offers limited relief for KE, as the company’s financial outlook remains fragile.
Declining Recovery and Financial Strain
K-Electric’s bill recovery rate dropped to 91.5% in FY2023-24 and is projected to fall further to 90.5% next year.
This decline could result in under-recoveries of nearly Rs97 billion over two years.
Nepra has already warned that KE’s Rs21.6 billion allowed return on distribution operations could vanish without government support or tariff adjustments.
New Efficiency and Loss Targets Set
Under the revised determination, Nepra introduced new efficiency benchmarks for the seven-year control period.
The transmission loss target is now 0.75% annually, down from 0.86% in FY2023-24, with an upper ceiling of 1%.
Tariff adjustments will depend on annual performance, rewarding operational improvements.
For distribution losses, Nepra approved a 9% total target, comprising 8% technical losses and 1% allowance for law and order challenges, based on the PITCO Fitchner study.
This figure is expected to gradually decline to 8.03% by FY2029-30, with technical losses reduced to 7.03%.
Efficiency Sharing Mechanism Maintained
The 75:25 sharing formula for over-performance will remain unchanged — 75% of efficiency gains will go to consumers, while 25% will be retained by K-Electric as an incentive.
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