ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) has constituted a high-level fact-finding committee to examine allegations by the Ministry of Water and Power that Karachiites had been overcharged to the extent of Rs62 billion by K-Electric over the past few years.

The three-member committee comprising a senior consultant, an adviser to the regulator and a desk officer concerned has been directed to comprehensively look into all aspects pointed out by the ministry on power tariff charged by the KE over the past10years.

The committee is required to submit a report within this week. The tariffs charged by the KE used to be approved by the regulator under a multi-year tariff mechanism. The regulator has declined to publicly comment on the power ministry`s issue.

A Nepra official, however, privately said the regulator was bound to examine a complaint even if it was made by a consumer but in this particular case the issue was of serious nature because it was highlighted by a key stakeholder, ie the power ministry which is the administrative ministry of not only the KE but also Nepra.

Therefore, being a quasi-judicial forum, Nepra would speak through a considered judgment based on wellresearched study, he said.

Last week, Secretary Water and Power Mohammad Younus Dagha wrote to Nepra chairman Tariq Saddozai to ensure refund of atleast Rs62bn he alleged was overcharged to Karachiites over the past few years through questionable tariff setting.

He also sought strict accountability of those involved in the scam.The K-Electric, on the other hand, has rejected outright the claims of excessive collection and labelled them as wrong interpretation of the tariff mechanism. It said the consumershadbeenchargedasperapproved tariff without any anomaly.

Mr Dagha had alleged that the impact of targeted reduction in transmission and despatch (T&D) losses, roughly estimated at Rs13bn for fiscal year 2015-16 alone, was not passed on the consumers. He said the impact of past 10 years on this account had been worked out at Rs60bn, starting from Rs2.46bn in 2009 and reaching Rs4.99bn and then gradually crossing Rs10.89bn in 2014.

He had directly accused Nepra for `unfair tarif f for KE consumers` and alleged major shortfalls on its part and demanded a thorough investigation and action against those responsible. `In recent revelations, it is noted with concern that the KE consumers have been made to pay a very high tariff resulting in windfall profits for KE.

The secretary water and power highlighted two specific examples to support this. First, it said the multiyear tariff provided for a mechanism whereby the tariff is to be adjusted every quarter to renect the revised fuel and energy purchase costs as well as targets for T&D losses.

Ideally, on a base tariff of say Rs100 per unit, if the cost component in a period has reduced by ñve per cent and the T&D losses have also been targeted to reduce by ñve per cent, the cumulative effect on tariff reduction would roughly be around 10pc or so and the new tarif f would be Rs90 or so.

However, by a strange tariff setting method, the tariff mechanism applicable to KE limits tariff reduction on account of reduced T&D loss benchmark only on `the change incost of generation` rather than `the total cost of generation`, hence limiting the benefit to KE consumers of the reduced T&D benchmark and effectively allowing KE higher T&D losses than the stated benchmark, the secretary said.

`This has now become evident as to how in all these years of falling oil prices; KE consumers were denied the benefit in fuel price adjustments,` wrote the secretary water and power. The windfall allowed to KE, on this account only, has been in billions every year through the multiyear tariff and quarterly adjustments determined by Nepra.

The rough calculations show that while the declared T&D losses allowed to KE are 15pc, the effective losses (due to the tarif f setting mechanism) allowed by such calculation comes to be around 28.5pc, which is 4.8pc higher than even its actual T&D loss (at 23.7pc).

Secondly, another area of such flaws in KE tariff calculations is cost of generation allowed to KE for its own generating units. The cumulative ef ficiency of KE plants is around 40pc while the cost is calculated by Nepra at an ef ficiency of around 37pc allowing an estimated Rs2bn last year. The secretary alleged that this tariff determination practice adopted for KE violated the general policy and guidelines relating to tariff determination.

The KE said the multi-year tariff (MYT), designed by international consultants based on global best practices, was approved and notified by the Ministry of Water and Power in 2002. The MYT is primarily a performance-based tariff where K-Electric earns through improvement in its performance against set benchmarks in the tariff, unlike independent power producers` guaranteed returns in dollars.