KE’s inefficient power generation plants should be shut down and the power generation mix must also be improved to reduce the power tariffs as high production cost of electricity being generated by K-Electric (KE) is a matter of concern.
This was stated by Chairman Businessmen Group (BMG) Zubair Motiwala and President Karachi Chamber of Commerce & Industry (KCCI) Muhammad Idrees in a letter sent to Chairman National Electric Power Regulatory Authority (NEPRA) prior to NEPRA’s hearing scheduled to held on November 2nd & 3rd, 2021.
Chairman BMG and President KCCI stated that if it was not possible for KE to bring down the cost of power generation then it should depend more on external purchases.
Focus should be to develop more power plants based on renewable energy while necessary transmission infrastructure has to be put in place to enable KE to purchase more electricity from Central Power Purchasing Agency (CPPA) as currently, the utility service provider was unable to do so due to inadequate transmission system, they added.
While referring to a news item appearing in a section of press, Chairman BMG and President KCCI noted that NEPRA itself has pointed out that the average fuel cost for KE’s own system in 2020-21 was Rs12.41 per kilowatt hour while CPPA’s fuel cost ranged between Rs3.24 and Rs6.06 per unit in 2020-21.
This situation was really alarming as KE’s generation cost was more than double as compared to purchased power.
They mentioned that the share of KE was just between 5 to 10 percent of the country’s total power generation.
Since KE’s own generation was more than two times expensive because of mainly being thermal based, the consumers particularly industries of Karachi suffer more due to fuel price hikes.
Lately, KE has demanded an increase of Rs. 3.454/Kwh for September 2021 under monthly Fuel Charges Adjustment, increasing the electricity rate by around 16 percent which was an exorbitant surge considering the fact that during the quarter (Jul-Sep’21) the average CPI inflation was 8.58 percent; Pak Rupee has devalued by 9.68 percent and the price of Brent inched up by 3.53 percent.
Hence, Chairman BMG and President KCCI demanded that the FCA should not be increased or if absolutely necessary, it should be within Rs. 1.0/Kwh and in future, KE should be barred from passing on the cost impact of inefficient power plants.
The Karachi Chamber further demands to shift away from dollar pegged power generation in favor of solar, wind and hydel power generation sources as electricity tariffs are mostly dollar indexed and Pak Rupee has depreciated steeply, they added.
They further pointed out that the high cost of electricity in the KE system was due to low efficiency of its newly inducted gas-based power plants as well as generation through furnace oil/ RLNG from low-efficiency steam turbine thermal power plants.
Moreover, generation via the costliest high-speed diesel as well as purchases of electricity from furnace oil-based power plants also results in KE’s high cost of electricity, they added.
Reviewing the reported monthly fuel cost component, they explained that that the difference between power generation by KE and external purchases has been constantly widening every month as it stood at Rs6.8654 per Kwh in June 2021 and subsequently furthered to Rs6.9391 in July, Rs7.346 in August and Rs9.784 in September which was too high as compared to the fuel cost component for external purchases which at Rs4.0267, Rs4.642, Rs4.3072 and Rs4.562 from July 21 to September 21.
