Business Recorder
ISLAMABAD: The Karachi Chamber of Commerce and Industry (KCCI) has opposed, in its entirety, K-Electric’s (KE) End of Term Adjustment (EOTA) claims of about Rs59 billion filed under its Multi-Year Tariff (MYT) for FY2017–2023. National Electric Power Regulatory Authority (NEPRA) is scheduled to hold a public hearing on KE’s petition on Tuesday (today) K-Electric submitted a petition before NEPRA seeking EOTA amounting to Rs43.6 billion, along with Rs15.3 billion in tax pass-through, pending power purchase costs, and other adjustments, taking the total claimed impact to Rs58.9 billion. The claims include exchange rate adjustments on Return on Equity (RoE), working capital requirements, tax liabilities, and pending quarterly adjustments. Given their retrospective nature and potential tariff impact, KCCI said the matter carries serious implications for industrial consumers. KE has claimed about Rs11 billion on account of exchange rate impact on allowed RoE. KCCI argued that foreign exchange fluctuations are largely a macroeconomic and investment risk rather than a direct operational cost of electricity supply. Allowing full pass-through, it said, would shift currency depreciation risk onto consumers while shielding shareholders, thereby increasing production costs and undermining export competitiveness. KE has also sought recovery of working capital adjustments, including Rs23.4 billion linked to doubtful debts and Rs10.4 billion related to actual working capital requirements. KCCI raised concerns over billing efficiency, recovery performance, theft control, and financial discipline, arguing that inefficiencies such as non-recovery, administrative lapses, and circular debt should not be passed on to consumers. It also cautioned against potential double recovery, given NEPRA’s earlier approval of partial write-offs on unrecovered receivables. The company further claimed Rs15.3 billion on account of tax pass-through, including revised liabilities for FY2022–23, projected liabilities for FY2018–21, WPPF-related claims, and pending power purchase adjustments. KCCI contended that a significant portion of these liabilities arose from adverse judicial decisions on minimum tax under Section 113 of the Income Tax Ordinance and represent corporate tax risks rather than operational costs. It maintained that only prudently incurred and finally adjudicated liabilities should be considered, excluding penalties, surcharges, and contingent claims. KCCI said the EOTA petition effectively seeks recovery of past financial exposures from current and future consumers, undermining the MYT framework’s objective of tariff predictability and financial discipline. Such retrospective adjustments, it noted, create pricing distortions and erode consumer confidence, particularly for export-oriented industries that require stable energy costs. The chamber also opposed KE’s request to allow future recovery of additional liabilities arising from pending assessments and adjudications, stating that such an open-ended mechanism would create regulatory uncertainty and weaken the finality of tariff determinations, exposing consumers to recurring tariff shocks. The petition includes about Rs261 million pending power purchase and related adjustments, including capacity payments linked to gas outages, NPMV claims, and WPPF adjustments. KCCI stressed that these claims require detailed scrutiny, as some may reflect operational inefficiencies or unresolved disputes rather than prudent costs. KCCI also highlighted concerns over previously approved bad debt write-offs of about Rs50 billion, warning against any indirect recovery through working capital adjustments. It strongly opposed transferring losses arising from theft, non-recovery, or inefficiencies onto paying consumers. The chamber argued that many of KE’s claims fall outside the permissible scope of EOTA, particularly those relating to exchange rate losses, doubtful debts, and open-ended future liabilities. It called for strict prudence checks on investments, including the treatment of Interest During Construction (IDC), and stressed that only efficient and operationally useful assets should be included in the regulated asset base. On tax adjustments, KCCI maintained that only verified and finally adjudicated liabilities should be allowed, excluding litigation-related costs and contingent claims. KCCI has urged NEPRA to: (i) disallow recovery of write-off-related amounts unless KE demonstrates full recovery efforts; (ii) cap or partially absorb exchange rate losses on RoE; (iii) exclude working capital claims linked to doubtful debts, theft, and non-recovery; (iv) limit tax pass-through strictly to verified liabilities; (v) reject any open-ended adjustment mechanism under EOTA; (vi) conduct an independent forensic and prudence audit of all major claims; and (vii) explicitly prohibit double recovery of bad debts. The chamber emphasized that industrial consumers must be protected from retrospective tariff burdens to safeguard export competitiveness and production viability. Separately, one of KE’s shareholders, Arif Bilwani, has also urged NEPRA to ensure that no claim lacking transparency, prudence, or regulatory basis is allowed, and that the matter is decided strictly in accordance with the NEPRA Act, 1997, applicable tariff standards, and principles of consumer protection. Copyright Business Recorder, 2026
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