ISLAMABAD : The struggling power utility company ,K-Electric (KE) has again approached National Electric Power Regulatory Authority (NEPRA) seeking reversal of its recent MYT review decisions through Suo Moto action, to protect the Company from financial disaster, reliable power supply to consumers and maintain investors interest in the privatisation of power Distribution Companies (DISCOs), well informed sources in NEPRA told Newzshewz on Saturday.
The implications of MYT review decisions of NEPRA have been explained by the Chief Executive Officer (CEO), KE, Syed Moonis Abdullah Alvi, in his letter to Chairman NEPRA. Alvi is on the hit list of one group of Directors of KE Board.
He has cited reference to the decisions issued by the NEPRA Authority on the review motions filed by various stakeholders in the matter of KE’s Multi-Year Tariffs (MYT) for the tariff control period commencing July 01, 2023.
KE, in its plea has highlighted that the MYT review decisions are a material departure from the NEPRA Authority’s earlier decisions having severe implications for KE’s financial and operational sustainability as well as the consumers, and hence, KE has challenged the MYT review decisions before the Appellate Tribunal and the Sindh High Court. The SHC has restrained NEPRA and the Federal Government from taking any coercive action in respect of the impugned determinations.
Further, without prejudice to the rights of KE and litigation, through this letter KE has explained NEPRA Authority of the drastic implications of the MYT review decisions.
According to the communication, the NEPRA Authority has premised the MYT review decisions on arguments of fiscal space and protection of consumer interest. In this regard, KE has made reference to para 13.18 (2) of the supply tariff review decision of October 20, 2025:
“That, notwithstanding the non-maintainability of the said Motions, the Authority in view of the substantive issues of public and sector-wide importance raised therein, which have significant financial implications for consumers and the national exchequer, hereby decides that a deliberation upon the substantive merits is incumbent upon the Authority, to discharge its obligations under the NEPRA Act.”
In this regard, KE has highlighted that the assertions made by the Ministry of Energy (Power Division) on which the NEPRA Authority has relied upon, with respect to implications for the national exchequer are also misplaced as KE’s Tariff Differential Subsidy (TDS) requirement based on the earlier approved tariff (base tariff of Rs 39.97/kWh for FY 2024) was well within the Government of Pakistan (GoP) budgeted TDS for the year FY 2024.
The power utility company claims that its consumers are also charged PHL surcharge which is primarily to fund the inefficiencies of the state-owned DISCOs. During the year FY 2024, Rs 37 billion was recovered from KE consumers in respect of PHL surcharge.
” It is clear from the surplus/ unutilized budget that there are no fiscal space issues as submitted by the Power Division and relied upon by the Honorable NEPRA Authority,” said KE.
Further, no substantive arguments have been given as to how the MYT review decisions protect consumer interest, and as a matter of fact, on the contrary the MYT review decisions ensure that consumers would be: (i) burdened with additional FCA as discussed in paras 16.16 and 16.17 of the supply tariff review decision of October 20, 2025; (ii) exposed to more load-shed, interruptions and frequent power breakdowns as the MYT review decisions erode KE’s financial viability and operational sustainability as more fully explained in this letter.
Sharing its stance on detailed implications of the MYT review decisions on continuity of smooth power supply in Karachi and adjoining areas, KE has recognized that it shares common objectives with the NEPRA Authority, which amongst others, include reduction in load-shed, improving network reliability and safety, increasing coverage across all of Karachi, achieving faster times to new connections and complaint resolution for customers. However, the achievement of these objectives is premised upon a sustainable tariff. The MYT review decisions on the other hand not only significantly undermine the regulatory consistency and certainty, but has wide-spread implications for KE, consumers and Pakistan.
KE has further argued that the MYT review decisions are a major departure from NEPRA decisions issued in October 2024 and May 2025 which were issued after almost 2 years of extensive regulatory deliberations and stakeholder consultations. Based on the earlier decisions, KE issued its Financial Statements for the year ended June 30, 2024, for which KE reported a net profit of Rs 4 billion. However, the MYT review decisions push KE into losses, with a loss before tax of Rs 85 billion for FY 2024 and a cumulative loss of around Rs 510 billion over the tariff control period (FY 2024 to FY 2030).
Lenders while approving new loans consider certain covenants/financial ratios of the Company. Under the current financing agreements, there are certain financial ratios that are required to be maintained by KE. It is a norm in the banking industry to assess borrower’s ability to service debt from operating cash flows before extending any financing. For example, for KE, a minimum Debt Service Coverage Ratio (DSCR) of 1.2x is mandatory. Similarly, under the loan agreements, KE is required to maintain a Debt-to- EBITDA of 3.3x maximum. However, after incorporating the impact of MYT review decisions, KE will be in significant breach of these debt covenants for the entire tariff control period.
Lack of Investment to Adversely Impact Reliability of Power Supply: The MYT review decisions will force KE’s investment plan of $ 2 billion till FY 2030 for its Transmission and Distribution network to be halted. With KE in losses, it will not have the ability to invest as it will neither have profits available for investment, nor any ability to raise debt or draw-down on its already-committed debt.
It has pointed out that unlike state-owned entities, KE is a private entity without any sovereign guarantee and hence KE has to raise financing for execution of its planned investments, backed by its own cashflows. Hence, given the financial implications of the MYT review decisions, the MYT review decisions are to result in reduction in the quality, reliability and availability of electricity in Karachi, along with declining levels of customer service.
Some of the key implications include: (i) lack of infrastructure investments will prevent KE from achieving the projected improvements in reliability indices; 14% in SAIFI and 39% in SAIDI. On the contrary, these indices are expected to deteriorate due to operating an ageing system without any new investment. KE would not be able to increase the projected additions in transmission capacity (2,000 MVA in 220 kV Auto Transformers and 755 MVA in Power Transformers) and a 29% addition in Distribution capacity (between 2023 and 2030) – this will hinder the accommodation of new load growth in the service area and adversely impact the continuity and quality of supply for the existing consumer base ;(ii) KE would be unable to meet NEPRA’s earlier approved T&D loss benchmarks due to lack of investment and the consequent inability to upgrade ageing infrastructure, which will result in higher technical losses and reduced network efficiency.
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Sharing views on key strategic projects like, KE has stated that augmentation on key load growth projects would not be possible especially in areas such as SITE, Landhi, Korangi and Maymar etc. where existing grid capacity is already exhausted and would lead to load-shed in peak hours and stoppage of new connections in industrial areas. This will have a consequential impact on the economic growth of Karachi.
Rehabilitation of existing aged/deteriorated transmission lines will be compromised impacting KE’s capacity to cater increase in demand and ensure reliability of its existing network which may also affect the capacity to draw power from the National Grid.
Augmentation of 220 kV network, which is necessary to avoid network constraints and to serve additional demand beyond the existing technical capacity of transmission network, would not be possible and will lead to increased load-shed.
Evacuation of power from any new power plants through setting up of new interconnections (including 220 MW Dhabeji Hybrid Site Neutral Project and 270 MW Surjani Solar Projects etc.) will not be possible. Further, it is also pertinent mention here that KE’s plans to induct renewable energy into its system will also be impacted due to financing limitations.
Hub Uthal Vinder Bela Transmission lines upgrade to 132 kV would not be possible which will expose those areas to lack of reliable power supply and potential safety issues as the existing 66 kV network requires immediate upgrade.
The target of increasing load-shed exempt feeders to 95% by 2030 will not be possible. As a matter of fact, it will not be possible for KE to sustain 70% of its network as load-shed free which includes 100% exemption to industrial feeders.
Distribution Technological advancements and initiatives aimed at enhancing innovation like ADMS etc. will be seriously hampered.
KE will be unable to comply with regulatory requirements, including N-1 system contingency for the Transmission Network. This will result in widespread outages in the event of any forced outage.
During FY 2025, demand crossed ~3,700 MW and in consumer interest, KE deferred load- shed when feels like temperature crossed 45°C. However, given the financial implications of the MYT review decisions, KE will no longer have the flexibility and will have to implement load-shed even in extreme heat.
” Due to lack of investments and financial and operational constraints, consumers would be exposed to more load-shed, frequent breakdowns, and long delays in rectification of faults etc. It is pertinent to mention that Karachi contributes ~20 to 25% to the national GDP and therefore, lack of reliable power supply or load-shed in industrial areas will have a consequential impact on the national productivity. Industrial consumers of Karachi have already started voicing their concerns and apprehensions around the MYT review decisions. Hence, the MYT review decisions fail to align with consumer interests,” KE maintained.
Supply Shortfall:- The NEPRA Authority has unilaterally decommissioned Korangi Combined Cycle Power Plant (KCCP) and remaining units (Unit 5 & 6) of Bin Qasim Power Station I (BQPS-I). In this regard, the submissions made by KE have been reiterated which confirms that without these plants, KE is expected to face an immediate shortfall of around 400 MW in summers of FY 2026, which could increase further in case of any network or machine tripping or technical outage. Therefore, the unilateral termination of these power plants is devoid of any logical explanation. Further, reference is made to para 10.17 of the Generation Tariff Determination of October 20, 2025 which states as follows:
“Further, considering the submissions of the MoE (PD), the Authority has also decided to discontinue tariff of BQPS-I and KCCP w.e.f. the date of notification of the instant decision in the official Gazette. Based on its representation, MoE (PD) shall ensure that the termination of these plants does not affect supply situation of KE.”
The power utility company is of the view that the maximum supply available from National Grid i.e. 2,000 MW has already been taken into analysis and hence any such direction to Power Division may not be relevant, as to increase supply, either a new interconnection grid or a new power plant is to be commissioned both of which cannot be done in the next 2-3 years as project planning, arranging financing and construction requires several years.
It is also important to highlight that NEPRA is fully cognizant of the fact that even for 2,000 MW supply assumed from National Grid, no guarantee or firm commitment exists for supply of power to KE from the National Grid beyond the 1,000 MW and supply over and above the firm 1,000 MW and upto 2,000 MW is on pro-rata basis. Moreover, the existing agreement of firm supply of 1,000 MW to KE from National Grid is set to expire in December 2033 and there is no contractual commitment from Ministry of Energy (Power Division) on continuation of such supply to KE beyond December 2033. Hence, the decision exposes KE consumers to a supply shortfall.
KE has reiterated that with a supply shortfall of around 400 MW in FY 2026 which will increase further in light of the projected growth in power demand, it will be left with no choice but to resort to incremental load-shed which may also include industrial consumers. Further, KCCP and BQPS I plants provide required contingency for any emergency situation(s), such as a machine/interconnection breakdown, RLNG terminal outages or a war-like scenario where the supply of gas is unavailable.
Accordingly, the early termination of KCCP and BQPS I plants by the NEPRA Authority will result in supply deficit, forcing KE to do incremental load-shed possibly including the industrial consumers, and hence the Honorable NEPRA Authority’s decision is against the consumer interest.
On gas supply matters, KE has stated that long-term Gas Supply Agreements (GSA), especially in case of RLNG supply include a minimum off-take commitment by the buyer, as sellers have to supply through cargos backed by international contracts (‘Take or Pay’ Commitment). Accordingly, in line with industry practice and to ensure availability of fuel supply, KE entered into a GSA for RLNG supply with PLL which is valid till December 2025.
Further, KE has completed its negotiations with PLL for renewal of the GSA for another 2.25 years and has initialled an extension of the agreement, which will be executed subject to approval of the NEPRA Authority. This agreement is necessary and in consumer interest, keeping in view the projected demand as well as availability of supply sources including the additional off-take from the National Grid (upto 2,000 MW).
However, the MYT review decisions do not give due consideration to KE’s obligations and industry practice and disallow any ‘Take or Pay’ Commitment in fuel contracts post December 2025. In doing so, the NEPRA Authority has not provided any rationale and in fact this decision is inconsistent with the prudent treatment afforded to other IPPs.
NEPRA’s decision to prohibit future ‘Take or Pay’ commitments for RLNG supply exposes KE to the risk of non-supply of RLNG, which ultimately will impact the availability of cheaper generation and hence supply of power to the consumers.
Moreover, the RLNG supply to KE from PLL is from the contractual arrangements that the GoP has entered into and in the absence of such arrangements, procurement of RLNG cargos will have to be deferred by the GoP. The loss on such deferment will eventually have to be passed onto the citizens of Pakistan, including in their electricity bills.
Macro and Socio-economic Implications : The MYT review decisions are also likely to have macro and socio-economic implications including but not limited to the following: (i) adverse Impact on National Productivity: Karachi is Pakistan’s largest and most populous city. It is the industrial, trading and financial hub of Pakistan and is at the forefront of the country’s economic growth and development. Unreliable power supply and increased load- shed will impact national productivity. Loss of productivity can fuel unemployment and reduce exports, which in turn could put negative pressure on foreign exchange reserves. Lack of reliable power supply and incremental load-shed may result in social unrest and law-and-order situation in the city.
The MYT review decisions negatively impact KE’s ability to reliably supply power including to hospitals, educational institutions, etc.
Considering that regulatory certainty and investor confidence has been severely undermined, the MYT review decisions are a major blow to GoP’s privatization agenda, especially in case of state-owned DISCOs.
The drastic change to KE’s tariff under MYT review decisions will have a material impact on the viability and sustainability of the Company and more importantly on its ability to make the much-needed investments for safe and reliable power supply to the consumers. Accordingly, the above implications clearly substantiate that the MYT review decisions do not protect consumer interest, nor do they ensure a financially sustainable tariff under Section 31 of the NEPRA Act.
The power utility company said that if the NEPRA Authority believes it is obligated to take Suo Moto under Section 7 (2)(g) of the NEPRA Act, then given the implications in detailed letter, it is incumbent upon the NEPRA Authority to use such powers to reverse its MYT review decisions in accordance with law to protect consumer interest and ensure a financially sustainable tariff as required under Section 31 of the NEPRA Act.
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