The National Electric Power Regulatory Authority (NEPRA) has approved a 7-year multi-year tariff (MYT) for K-Electric, setting new rates for its electricity distribution and transmission businesses from 2024 to 2030, according to official documents and media reports on Saturday.
Under the approved plan, K-Electric will receive Rs. 3.31 per unit for its electricity distribution services—lower than the Rs. 3.83 per unit the company had originally proposed. For electricity transmission, NEPRA has approved a tariff of Rs. 2.98 per unit.
Dollar-Based Profit Sparks Controversy
Despite opposition from the federal government and public stakeholders, NEPRA has allowed dollar-based returns on K-Electric’s distribution and transmission segments. This provision has drawn criticism during public hearings, as consumers argued that K-Electric is not an Independent Power Producer (IPP) and therefore should not be entitled to foreign exchange-indexed profits.
Returns on Equity Approved
According to NEPRA’s decision, K-Electric has been granted:
- 14% Return on Equity (RoE) for its distribution business
- 12% RoE for the transmission business
These rates are in line with regulatory practices for regulated utilities, but critics argue that the economic burden of such returns—especially when dollar-based—ultimately falls on the consumers.
Implications for Consumers and Energy Policy
The approved tariff plan provides regulatory clarity and financial predictability for K-Electric, which is Pakistan’s only vertically integrated power utility, serving over 3 million customers in Karachi and adjoining areas. However, the inclusion of dollar-based profits in a regulated utility model may set a controversial precedent, especially amid rising inflation, currency depreciation, and growing public dissatisfaction with power tariffs.
Background
NEPRA’s multi-year tariff model aims to improve transparency, encourage investment in grid infrastructure, and ensure service reliability. K-Electric’s last MYT expired in 2023, prompting the utility to seek new rates to reflect operational costs, investments, and expected returns.
Consumer advocacy groups have announced plans to challenge the dollar-indexed profit clause, stating that it could lead to higher electricity bills, particularly if the Pakistani Rupee weakens further in coming years.
