K-Electric gets 20-year licences for distribution, supplier of last resort

ISLAMABAD: The National Electric Regula­tory Authority (Nepra) on Friday granted a non-exclusive distribution licence and a supplier-of-last-resort (SoLR) licence to K-Electric Ltd (KEL) both for 20 years, valid until Jan 18, 2044.

The non-exclusive distribution licence to KEL means that smaller private power distribution companies with a licence from Nepra would be allowed into the power distribution and sale business, particularly in housing societies and colonies but their default or inability to ensure power supply to consumers would shift the rights, responsibilities and benefits of the power supply to KE under the SoLR.

KEL’s previous 20-year distribution licence had expired in July 2023 and Nepra had allowed an interim licence for six months. The extension in distribution licence and award of SoLR for the next 20 years came about after the majority of consumer groups from Karachi supported KEL’s request in the interest of continuity and better service delivery with the utility’s commitment for Rs484bn future investment.

There were also consumer groups who opposed the licences to KE for alleged poor performance and expensive power because of old plants and suggested the term of licence should be for 3-5 years and extension linked to performance targets.

They said the KEL had not been able to enhance its generation capacity and still heavily dependent on supply from the national grid and its basket was heavily skewed towards imported fuel. They also pointed out that KEL had failed to pass on various reliefs allowed by the regulator relating to the clawback mechanism and has approached the courts.

Nepra also noted that it was “of the considered opinion that the performance of KEL is not up to the mark when compared to best industry practices worldwide as well as of the region” but said it was also a “fact that KEL is one of the top-performing Disco(s) when compared with its peers”.

Moreover, Nepra was also “of the view that despite being below par, there is no other option but KEL having a licence for distribution business”.

To address concerns of the adverse voices, the regulator asked the KEL to adhere to the Nepra Act, rules & regulations and all the applicable documents.

“Moreover, KEL shall improve its performance for the service delivery to its consumers including but not limited to the achievement of targets given for the reduction in line losses in the Multi-Year Tariff (MYT), improvement in reduced time for new connection and expansion in IT intervention to make the process more transparent and consumer-friendly”.

It said the distribution licence could not be given for a shorter term under the rules passed by the government stipulating the minimum term of such licence to be 20 years. The distribution licence allows a power company to engage in the distribution of electric power to the consumers in its service territory on a non-exclusive basis. KEL is the only vertically integrated electric supply company in the country providing utility services to the entire metropolitan city of Karachi and its suburbs up to Dhabeji and Gharo in the province of Sindh and over Hub, Uthal, Winder and Bela in the province of Balochistan.

The regulator noted that KEL had promised to meet the future power demand it was diligently pursuing an increase in Interconnection Capacity to off-take additional power from the national grid, addition of local coal-based plants including options for conversion of imported coal projects to local coal and addition of 1,282mw of renewable projects.

Nepra has already granted SoLRs and non-exclusive distribution licences to ex-Wapda distribution companies on similar grounds.