Nepra OKs Rs 392.4 billion K-Electric investment plan to upgrade grid

• KE aims to achieve a 30% share of renewable energy sources by 2030.
  
• Funds to be used to improve transmission and distribution efficiency.
• Rs 238.22 billion will be spent on upgrading the transport system.

ISLAMABAD: The National Electricity Regulatory Authority (Nepra) has approved K-Electric’s (KE) investment plan of Rs 392.49 billion to upgrade the grid, The news reported on Thursday.

The investment funds, approved after thorough vetting and evaluation, will be leveraged over the next seven years from the financial year 2023-24 to 2029-30.

The approval comes after Nepra, in January earlier this year, renewed the JV’s power distribution and supply licenses for 20 years after its previous license expired in July 2023.

Nepra’s approval of investment funds comes after KE, which initially sought Rs 484 billion, submitted its investment plan along with a loss estimate to the regulator on January 30, 2023, as per the regulator’s guidelines and the NEPRA Act of 1997.

It is noted that the approval provides for certain terms and conditions that allow it the sole discretion to interpret the investment plan with petitioners and interested parties addressing the authority directly in case of need for any clarification.

Also, the electricity supplier is required to procure cost-effective materials and services for the execution of the project and must amend its transmission permit for fixed 500 kV and ensure zero fatal accidents and safe working environment with approved investments.

In addition, quarterly third-party audits of the JV’s investment plans are mandatory along with quarterly progress reports on investment utilization and physical progress, the latter to be submitted to the Nepra e-portal.

In addition, petitioners, who also bear the risk of costs incurred without a clear forecast, are required to clearly document investment and maintenance projects, verified by third-party audits.

Last year in March, the power supplier had sought an increase of Rs 1.9 per unit in transmission tariff and Rs 1.3 per unit in distribution tariff if the sought investment funds of Rs 484 billion were approved.

This meant there would be a cumulative increase of Rs 3.2 (@206 USD/PKR) per unit.

Recognizing the complexity of the situation, Nepra had subsequently postponed the decision on subsidies in the feed-in tariff proceedings and focused only on the approval of the investment plan.

The publication further said that this may have an impact of over Rs 2.5 per unit increase for KE consumers.

Here’s an in-depth look at the JV’s seven-year investment plan.

Investment plan

According to the investment plan, KE is required to allocate Rs 238.22 billion to upgrade the transmission system and Rs 136.76 billion to improve electricity distribution infrastructure.

Meanwhile, Rs 17.31 billion is to be used for support projects including IT infrastructure and Enterprise Resource Planning (ERP) at Rs 12.85 billion, Defense, Security, Risk Assessment and Compliance at Rs 2.655 billion , as well as property settlement and office renovations of Rs 1.8 billion and will be spread over seven years.

Transmission improvement

The improvement in the transmission network accounts for a notable chunk of the investment plans which envisage Rs 79,694 billion for development of network stations along with Rs 41,112 billion for transmission line expansion.

Also, capital expenditure of Rs 17.617 billion used to strengthen the infrastructure of 500 kV KKI grid station between 2017 and 2023, has been incorporated in the first year of the newly approved plan (FY24).

The new investment plan also provides Rs 14.253 billion for grid station maintenance and protection along with Rs 4.754 billion directed towards maintenance and protection of transmission lines to ensure their longevity and operability.

Meanwhile, Rs 2.684 billion will be used for transmission security measures, highlighting the importance of security and stability in transmission infrastructure.

Funds amounting to Rs 8.149 billion will be used to reduce congestion and improve network reliability, particularly for new transmission lines that meet NI emergency provisions, while Rs 18.508 billion has been earmarked for rehabilitation and augmentation of existing lines of NI provision. Also, Rs 11.847 billion has been earmarked for replacements and other works.

These investments include the installation of a third transformer at the 500 kV NKI Grid Station and a 220 kV D/C LILO line from NKI at Baldia/Surjani, each receiving Rs 5.084 billion and Rs 1.320 billion respectively.

In addition, Rs 2.556 billion has been allocated to reduce transmission losses. Meanwhile, National Grid Interconnection (NTDC) and solar power projects such as 500 kV KKI Interconnection and 220 kV Dhabeji Interconnection are also included at Rs 1.683 billion and Rs 1.643 billion respectively.

Additionally, projects targeting 350 MW solar power integration were allocated Rs 5.18 billion. 220 kV Gharo Step-up Grid Station for interconnection of 600 MW Solar-WPPs Rs 7.16 billion and for associated transmission line Rs 5.66 billion. The plan also includes investments in a current limiting reactor and SCADA and other automation equipment, with a total budget of Rs 1.148 billion and Rs 8.161 billion respectively.

Improving distribution efficiency

The approval of the investment plan, which totaled Rs 136.764 billion in this sector, envisages funds for distribution development initiatives of Rs 29.461 billion with Rs 43.323 billion being allocated for minimizing losses within the distribution network.

Meanwhile, investments in distribution maintenance, security measures, AMR and digitization stood at Rs 29.919 billion, Rs 20.546 billion and Rs 4.614 billion, respectively.

Whereas, Rs 8,901 million is to be used for implementation of smart grid technologies.

Transmission and distribution losses

The regulator also approved the Transmission and Distribution (T&D) losses for the electricity supplier, which essentially reflect a gradual reduction during the financial years 2023-24 to 2029-30.

Distribution loss rates fall from 13.46% in 2023-24 to 11.48% in 2029-30, while transmission losses remain flat at 1.30% over the period. Total T&D loss target drops from 14.58% to 12.63% over the same period.

It is noted that any additional loss reduction beyond the target for a given year will be shared between the consumers and the KE in the ratio of 75:25, respectively.

Reacting to Nepra’s approval of its investment plan, KE said it is reviewing the regulator’s decision and “will remain committed to Nepra, and as we move forward, a sustainable and reflective tariff remains critical to timely execution of the investment plan. “

The investment plan, according to the company, complements the Energy Acquisition Program, as it includes the goal of achieving a 30% share of renewable energy in its production mix by 2030.

The power supplier also noted that it has also received regulatory approval for RFPs of 640 MW of renewable energy projects, which is another critical link in the mission to enable access to affordable energy for all.

“Over the next seven years, we seek to invest $2 billion in Transmission and Distribution to manage the city’s needs through targeted investments and technology-based interventions. I would like to acknowledge the efforts of all stakeholders involved in this journey and who will continue to work with us to modernize our infrastructure and prepare us for the future,” said KE CEO Munis Alvi.