K-Electric has its way after tribunal rules against Nepra

ISLAMABAD: In a rare development, the National Electric Power Regulatory Authority (Nepra) had to surrender to a legal stance of K-Electric that it had rejected twice in the past involving over Rs1.44 billion financial cost to be charged to KE consumers at the rate of about 33 paise per unit.

Nepra had acceded to the KE’s position following speaking orders of an appellant tribunal (AT) led by retired Justice Mujahid Mustaqeem Ahmed against the regulator’s earlier judgements of September 2021 and May 2022. This is perhaps the first publicly known occasion that Nepra had to change its decision on which it had also rejected an appeal.

The Appellant Tribunal (Nepra) appointed by the federal government about three years ago to adjudicate appeals against power regulator’s decisions held that the rationale given by Nepra was “contrary to the guidelines for Nepra under section 31, of the power act…and also does not hold prudence”.

The appellant tribunal made it clear that it was “a well-settled principle of administration of justice that all judicial, semi-judicial tribunals or adjudicating authorities are bound to decide the cases, falling within their domain, jurisdiction in accordance with law, rules and not on the basis of whims, wishes or liking or disliking or personal feelings”.

Power regulator had earlier rejected plea to charge fuel cost component twice

Moreover, “none of such institutions has any power, discretion or the authority to bypass the law”, it added.

Therefore, the AT remanded the case back to Nepra to change its decision while also acknowledging that Nepra had rightly opined that KE had not made convincing efforts to timely completion of 940MW Bin Qasim Power Station (BQPS) III within the stipulated deadlines and imposed a fine on KE but this “ground is not sufficient to deprive the appellant (KE) from prudent cost, incurred” and the Nepra’s defending team could advance convincing justification for not allowing fuel cost component (FCC) for an old plant.

Nepra had earlier imposed a Rs200m fine on KE for over five-year delay in the commissioning of BQPS-III — which was due in July 2018.

In its original decision in Sept 2021, Nepra had disallowed KE the FCC for more than a quarter of a year (May 1, 2021 to August 15, 2021) for interim operations on LNG of Unit-3 of BQPS-1 that had earlier been removed from the KE’s generation licence for being old and inefficient. The plant was brought in as the best option and most feasible to meet the peak summer demand in Karachi. KE had argued that if it had now operated Unit-3 of BQPS-1 for the interim period, either loadshedding would have to be carried out or otherwise power would have to be generated through expensive high-speed diesel (HSD).

Nevertheless, Nepra had allowed an FCC of only Rs9 per unit assessed for BQPS-III (LNG-based power plant) and disallowed about Rs11.6 per unit additional fuel cost of Unit-3 and had held that “inefficiencies of KE for not bringing cheaper plan on time” should not be passed on to consumers.

An appeal by KE against the decision was rejected by Nepra as well in May 2022 in which the power utility agitated that no such precedence was available to deny it the Rs20 per unit fuel cost and the regulator had allowed such costs to NTDC and independent power producers (IPPs).

The appellant panel, however, noted Nepra’s version was “factually and legally” incorrect and noted Nepra had itself allowed the licence proposed modification for interim use of Unit-3 of BQPS-1 (furnace oil-based) and was entitled to get FCC for the fuel consumed” but Nepra ignored this fact and instead was much impressed for KE’s failure for not bringing BQPS-III (RLNG-based) as committed.

The tribunal ruled that Nepra was bound by the law to allow prudent cost and given the peculiar facts and circumstances of the case, KE was entitled to recovery of prudent incurred FCC cost.

On the basis of tribunal remand, Nepra finally also found out that it had already imposed a Rs200m fine on KE on account of loadshedding and delay in commissioning of BQPS-III. “Therefore, KEL should not be put into double jeopardy….should be allowed to recover the prudent cost incurred to meet its demonstrated needs.” Moreover, Nepra also realised “if the interim operation of unit-3 of BQPS-1 was allowed by the authority in the public interest, then the cost associated with the operation of the plan should also be allowed as a prudent cost” and hence its earlier decisions “stand modified”.