Karachi Chamber asks for shutting down KE’s inefficient power plants

Chairman Businessmen Group (BMG) Zubair Motiwala and President Karachi Chamber of Commerce & Industry (KCCI) Muhammad Idrees, while expressing deep concerns over the high production cost of electricity being generated by K-Electric (KE), urged that KE’s inefficient power generation plants should be shut down. At the same time, the power generation mix must also be improved to reduce the power tariffs.

n a letter sent to Chairman National Electric Power Regulatory Authority (NEPRA) before NEPRA’s Hearing scheduled to be held on November 2nd & 3rd, 2021, Chairman BMG and President KCCI stated that if KE couldn’t bring down the cost of power generation, then it should depend more on external purchases. The 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 is unable to do so due to inadequate transmission system, they added.

While referring to a news item appearing in a section of the 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 generation was more than twice 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 excessive surge because, 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 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 favour 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 the low efficiency of its newly inducted gas-based power plants and generation through furnace oil/ RLNG from low-efficiency steam turbine thermal power plants. Moreover, generation via the costliest high-speed diesel and 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. This burden was being passed on to consumers in the form of higher tariffs.

They stated that KE has been generating and purchasing electricity from higher-cost power plants even though the cost-effective take-or-pay generation capacity in the CPPA system remained underutilized.

Zubair Motiwala and Muhammad Idrees stated that it was unfair for the legitimate consumers to bear the burden of inefficiencies of discos, imprudent energy policies, the deplorable composition of energy mix and electricity thefts. The business and industrial community was already facing immensely due to the high cost of doing business. Since electricity is a significant component of production, Chairman BMG and President KCCI strongly pleaded against adding an otherwise avoidable burden of costlier electricity.

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