Delay in BQPS-III project: PD accuses KE of ‘overburdening’ consumers by Rs200bn

ISLAMABAD: The Power Division has accused K-Electric of overburdening consumers by around Rs200 billion due to an inordinate delay in the BQPS-III power project, and has urged National Electric Power Regulatory Authority (NEPRA) to take a fair decision on KE’s petition regarding its multi-year tariff (MYT) and End of Tariff Adjustment (EOTA), well-informed sources told Business Recorder. According to the Power Division, KE significantly delayed the execution of the BQPS-III project despite its commitment to complete it within three years, as conveyed in its letter dated September 18, 2017, submitted to NEPRA during MYT proceedings. The project, originally scheduled for completion by FY2019, was eventually commissioned in May 2023, as noted in paragraph 15. 5 of NEPRA’s decision dated October 22, 2024, without adequate justification for the prolonged delay. The Division maintains that this delay had a direct and adverse impact on consumers, as it postponed the availability of relatively efficient and cost-effective generation. As a result, the system continued to rely on more expensive power sources, leading to an additional financial burden exceeding Rs200 billion on consumers as well as the national exchequer. It further noted that while approving the investment, NEPRA had explicitly stipulated in para 28. 30. 19 of its MYT determination dated March 20, 2017, that failure to execute the project in accordance with the approved plan could invite legal proceedings. The substantial delay, therefore, constitutes a clear deviation from the committed timelines and the approved regulatory framework. In light of this, the Power Division has urged the Authority to take cognizance of the matter and initiate appropriate proceedings against KE for non-compliance, in order to uphold regulatory discipline and protect consumer interests. The KE had sought approval for BQPS-III with a committed completion date of December 2019; however, the project achieved commercial operation date (COD) only on May 10, 2023. Despite this delay, depreciation amounting to approximately Rs10. 9 billion was allowed for the period FY2020 to FY2023. The Power Division argued that this treatment is inconsistent with regulatory principles, as depreciation is permissible only on assets that are capitalised and available for use. Since the plant remained incomplete and non-operational during the said period, the allowance of depreciation is unjustified and resulted in undue financial benefit to KE. It has, therefore, requested NEPRA to reassess the depreciation allowed and make a downward tariff adjustment of around Rs10. 3 billion. Similarly, the Division contended that operation and maintenance (O&M) expenses allowed for BQPS-III from FY2019 to FY2023 are not aligned with the plant’s actual operational status. According to KE’s own submissions, the plant became operational only in May 2023. Allowing full O&M expenses during the construction or pre-operational phase, it argued, is inconsistent with the principles of prudence, efficiency, and cost causation, as such costs should correspond to actual operation and availability of the asset. The recovery of these costs during the pre-COD period has led to over-recovery and an undue financial benefit estimated at approximately Rs13. 5 billion. The Division has requested NEPRA to review and rationalise these expenses and make an appropriate downward tariff adjustment. Furthermore, the Power Division claimed that KE has over-recovered substantial amounts under the Regulated Asset Base (RAB), depreciation, and O&M components. These excess recoveries have either generated markup income or been utilised for operational purposes, resulting in additional financial gains. It emphasised that, in line with regulatory principles, any over-recovery must be adjusted and returned to consumers. Moreover, the time value of money should also be accounted for, as the utility has benefited from utilising these funds over time. Accordingly, the markup or financial benefit derived from such excess recoveries should be passed on to consumers. The estimated impact of this adjustment is around Rs36 billion, which, the Division said, warrants consideration in the tariff determination. The Power Division has, therefore, requested NEPRA to undertake a comprehensive reassessment and allow appropriate downward adjustments in tariff to ensure that only prudent and justified costs are passed on to consumers. Copyright Business Recorder, 2026

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