Gas diversion to K-Electric could save govt Rs80bn

ISLAMABAD: The diversion of gas from Captive Power Plants to K-Electric’s facilities could save the government up to Rs80 billion in subsidies, according to K-Electric officials.

This was stated in a public hearing on K-Electric’s petition for an increase of Rs0.51/unit for Karachi consumers under monthly fuel charge adjustment (FCA) for August 2024.

During the hearing, chaired by Nepra Chairman Waseem Mukhtar, K-Electric’s Chief Financial Officer Aamir Ghaziani stated that the company has adequate supply capacity to support these industries. He emphasized K-Electric’s commitment to facilitating the transition to the grid, either through third-party agreements or direct connections. He also noted that the government could save approximately Rs80 billion in tariffs if natural gas was provided instead of more expensive re-gasified liquefied natural gas (RLNG). This change could potentially reduce electricity costs for consumers by Rs10 to 15 per unit.

The Karachi chapter of Jamaat-e-Islami (JI) called for the cancellation of K-Electric’s distribution license, urging the federal government to take over its operations. He criticized K-Electric for not being self-sufficient in electricity production and for not providing affordable electricity. “K-Electric’s plants are outdated and should have been scrapped,” Shahid remarked, urging Nepra to hold regular hearings on K-Electric’s loadshedding issues. He also claimed that K-Electric has not made the agreed-upon investments, hindering consumer access to new connections.

Member Nepra Rafique Shaikh from Sindh expressed concerns about the implications of revoking the license of K-Electric. “If K-Electric’s license is revoked, it will lead to chaos in the country,” Shaikh stated. He added that Nepra had imposed numerous fines on K-Electric, but the authority has not been able to collect these penalties, thus failing to benefit the public.

K-Electric reported a year-on-year demand growth of about 1 percent between August 2023 and August 2024, contrasting with a decline reported by other distribution companies.

Rehan Jawed, representing the Korangi Association of Trade & Industry, raised concerns over delays in determining K-Electric’s generation tariff under the new Multi-Year Tariff framework. He argued that the current distribution of natural gas primarily benefits a select few business groups, leaving other industries and consumers at a disadvantage. Jawed mentioned that supplying just 100 million cubic feet per day (MMCFD) of natural gas to K-Electric could save an estimated Rs80 billion in subsidies for Karachi’s power consumers. He also highlighted that customers on the grid would incur capacity costs of around PKR 132 million due to reliance on captive power as a backup.

In response to remarks from Tanveer Bari, Vice President at the Karachi Chamber of Commerce and Industry, Ghaziani clarified that high costs were mainly due to expensive fuel supplied to K-Electric rather than operational inefficiencies. He reiterated that a steady supply of natural gas could significantly lower costs for consumers.

Ghaziani further explained that K-Electric is piloting a shift from loadshedding at the feeder level to the PMT level, with a detailed report submitted to NEPRA for review. In response to unverified accusations from Jamaat-e-Islami Karachi’s energy expert Imran Shahid, K-Electric’s CEO stated that consumers can now apply for new meter connections online or at K-Electric customer care centers.

Nepra has reserved its judgment on K-Electric’s provisional FCA request and will announce its final decision, including the duration for which the FCA will be charged from consumers.