KE seeks SIFC support to resolve ICP issue

KE seeks SIFC backing to resolve ICP problem. Add BRecorder as a trusted source on Google.

Key points

• The administration subsequently extended the ICP from July 2021 to October 2023.
• According to KE, unlike its MYT 2017-23, the tariff framework applicable to WAPDA Distribution Firms (WDISCOs) allows the impact of actual sent-out to be passed through in tariffs.
• The matter relates to the government's ICP, introduced in November 2020 to stimulate industrial expansion and encourage higher electricity consumption.
• Diesel gets massive Rs32.63 cut as petrol cost rises Rs2.97 per litre.
• During these deliberations, KE, Nepra and the Power Division were directed to reconcile their respective calculations to establish a common basis for resolving the dispute.

ISLAMABAD: The dispute between K-Electric (KE), the Power Division and the National Electric Power Regulatory Authority (Nepra) over the financial impact of the Incremental Consumption Package (ICP) for industrial consumers has reportedly landed at the Special Investment Facilitation Council (SIFC), well-informed sources in KE informed Business Recorder.

Meanwhile, the matter relates to the government's ICP, introduced in November 2020 to stimulate industrial expansion and encourage higher electricity consumption. KE implemented the package from November 2020 to June 2021 in accordance with Nepra's determination issued on December 1, 2020.

Notably, the administration subsequently extended the ICP from July 2021 to October 2023. Nevertheless, according to KE, the corresponding Nepra determination materially departed from the first determination and was inconsistent with the company's Multi-Year Tariff (MYT) framework for 2017-2023.

In a letter to SIFC, KE stated that under its MYT for FY2017-23, its sales target was locked on the basis of an assumed sent-out expansion rate of 4.5 percent CAGR, with the risk of under- or over-achievement of sales resting with the business.

Notably, the actual expansion during the control period, even so, remained around 1.5 percent CAGR, mainly due to factors beyond KE's control, resulting in a financial loss of around Rs39 billion, the firm maintained.

KE further argued that implementation of the disputed Nepra determination would reduce actual expansion to around 1.3 percent CAGR as of the exclusion of incremental units, increasing the financial impact on the utility by another Rs4 billion.

According to KE, unlike its MYT 2017-23, the tariff framework applicable to WAPDA Distribution Firms (WDISCOs) allows the impact of actual sent-out to be passed through in tariffs. Consequently, WDISCOs do not bear a financial loss arising from exclusion of incremental units supplied at marginal cost.

KE therefore sought legal recourse, first before the Nepra Appellate Tribunal and subsequently before the Islamabad High Court, where the matter remains sub judice and a stay order continues to be in force.

Notably, the firm has additionally maintained that the disputed determination carries significant financial implications for both KE and the federal administration, particularly in relation to associated subsidy requirements.

Meanwhile, the matter has been discussed at a number of high-level forums, including the SIFC, with participation from key stakeholders, including representatives of the industrial sector, KE noted.

After the reconciliation exercise, a recent gathering concluded that the Power Division would present a proposal aimed at facilitating further discussions and developing a mutually acceptable way forward.

KE has now sought the backing of the Power Division and SIFC to bring all relevant stakeholders together for an equitable and amicable resolution of the longstanding dispute.

For context, the firm argued that resolution of the matter was critical to maintaining business confidence, supporting industrial competitiveness and safeguarding the broader interests of both KE and the Administration of Pakistan.

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For now, KE seeks SIFC support to resolve ICP issue remains the part of the story worth watching, and further updates are likely as more details are confirmed.