National Electric Power Regulatory Authority
Islamic Republic of Pakistan
NEPRA Tower, Attaturk Avenue (East), G-511, Islamabad.
Tel: +92-51-9206500, Fax: +92-51-2600026
Web: www.nepra.org.pk, E-mail: registrar@nepra.org.pk

Registrar
No. NEPRA/DG(M&E)/LAD-0I/

4' 3 3

April 03, 2024

Chief Executive Officer,
K-Electric Limited (KE),KE House, Punjab Chowrangi,
39 — B, Sunset Boulevard, Phase-TI,
Defence Housing Authority,
Karachi
Subject:

ORDER OF THE AUTHORITY IN THE MATTER OF SHOW CAUSE NOTICEISSUED TO K-ELECTRIC UNDER REGULATIONS 4(8) & 4(9) OF NEPRA(FINE) REGULATIONS, 2021 ON ACCOUNT OF AT&C-BASED LOAD
SHEDDING

Please find enclosed herewith, the Order of the Authority (total 15 pages) in the subject matterfor information and compliance.
Enclosure: Order of the Authority (total 15 Pages)(Engr. MazhaiIqbal Ranjha)

National Electric Power Regulatory Authority

ORDER
IN THE MATTER OF SHOW CAUSE NOTICE ISSUED TO K-ELECTRIC
LIMITED UNDER REGULATIONS 4(8) AND 4(9) OF NEPRA (FINE)REGULATIONS, 2021 ON ACCOUNT OF AT&C-BASED LOAD SHEDDING.

K-Electric Limited (KE) (the "Licensee") was granted a Distribution License (No.
DL/09/2024) by the National Electric Power Regulatory Authority (the "Authority") on
19.01.2024, for providing Distribution Services in its Service Territory as stipulated inits said Distribution License, pursuant to section 20 read with 21 of the Regulation ofGeneration, Transmission and Distribution of Electric Power Act, 1997 ("NEPRA
Act").
2.

During hearings in the matter of Monthly Fuel Price Adjustments (FPAs) for DISCOs
and K-Electric being held on monthly basis, number of complaints regarding
unscheduled load shedding by general public had been and are being received by the
Authority. Upon inquiry, it was revealed that load shedding is being carried out on thebasis of AT&C losses policy which is not in line with the provisions of the NEPRA
Act, 1997, and Performance Standards (Distribution) Rules, 2005, and has never beenrecognized by NEPRA.

3.

According to Rule 4 (f) of NEPRA Performance Standards Rules:(i) A distribution company shall have plans and schedules available to shed up
to 30% of its connected load at any time upon instruction from NTDC. This
30% load must be made up from separate blocks ofswitchable load, which
can be disconnected in turn at the instruction from NTDC. A distribution
company shall provide copies of these plans to NTDC.
'ii) Wherever possible NTDC shall give distribution companies advancewarning of impending need for load shedding to maintain system voltage
and/or frequency in accordance with the Grid Code.
(iii)As per the provisions of the Grid Code, NTDC shall maintain an overview
and as required instruct each distribution company the quantum of load tobe disconnected and the time of such disconnection. This instruction shallbe given in clear, unambiguous terms and related to prepared plans.
) When instructed by NTDC, the distribution companies shall shed the loadin the following order, namely:(a) Suppy to consumers in rural areas; and residential consumers in urban
areas where separate feeders exist.
(b) Supply to consumers, other than industrial, in urban areas.
Page 1 of 15

(c) Supply to agriculture consumers where there is a dedicated power supply.
(d) Supply to industrial consumers.
(e) Supply to schools and hospitals.
Supply to defense and strategic installations.
(v) A distribution company shall prepare schedules of load disconnection,
which demonstrate this priority order and which rotate load disconnections
within the above groups in a non-discriminatory manner. The principle ofproportionality shall be kept in mind so as not to excessively burden aparticular consumer class.
4.

The Authority further observed that the Licensee is even violating its own so-called
AT&C policy and carrying out excessive load shedding as compared to the scheduledone. Moreover, few feeders were randomly selected, and observed that the Licensee
has been failed to make improvements in technical and financial health of those feeders
since last four years despite allowing colossal amounts under O&M head by NEPRA
and continuing their operations in status quo, due to which, even good paying
consumers are being suffered a lot.

5.

Therefore, the Authority decided to initiate legal proceedings against the Licensee
under NEPRA Fine Regulations, 2021.

6.

In view thereof, an Explanation was served to the Licensee under Regulation 4(1) and4(2) of NEPRA (Fine) Regulation, 2021 on January 03, 2023, on account of providing
electricity on a non-discriminatory basis by carrying out AT&C-based load shedding
and failure to comply with Performance Standards (Distribution) Rules. The Licensee
vide its letter dated January 28, 2023, submitted its reply, and a hearing in this regard
was held on March 01, 2023.

7.

The response/submissions of the Licensee was analyzed, whereby the Authority
observed that the response submitted by the Licensee against Explanation isunsatisfactory. Therefore, the Authority decided to issue a Show Cause Notice (SCN)
to the Licensee under Regulation 4(8) & (9) of the NEPRA (Fine) Regulations, 2021.

8.

Accordingly, a Show Cause Notice (SCN) along with the Order recording reasons forrejection of Explanation was issued to the Licensee on September 11, 2023. The salientfeatures of the said SCN are narrated as under:

3. "WHEREAS, pursuant to section 21(2) ('b) of the NEPRA Act, the Licensee is
responsible to provide distribution service and make sales of electric power
within its territory on a non-discriminatory basis to all the consumers who meetthe eligibility criteria laid down by the Authority; and4. WHEREAS, pursuant to section 21(2) co of the NEPRA Act, the Licensee isrequired to follrnv the performance standards laid down by the Authority for
distribution and transmission of electric power, including safety, and
5. WHEREAS, Rule 4(f) of NEPRA Performance Standards (Distribution) Rules,
2005, states below:
Page 2 of 15

(i) A distribution company shall have plans and schedules available to shed up
to 30% of its connected load at any time upon instruction from NTDC. This
30% load must be made up from separate blocks of switchable load, which
can be disconnected in turn at the instruction from NTDC. A distribution
company shall provide copies of these plans to NTDC.
(ii) Wherever possible NTDC shall give distribution companies advancewarning of impending need for load shedding to maintain system voltage
and/or frequency in accordance with the Grid Code.
(iii)As per the provisions of the Grid Code, NTDC shall maintain an overview
and as required instruct each distribution company the quantum of load tobe disconnected and the time of such disconnection. This instruction shallbe given in clear, unambiguous terms and related to prepared plans.
(iv) When instructed by NTDC, the distribution companies shall shed the loadin the following order, naniey:(g) Supply to consumers in rural areas; and residential consumers in urban
areas where separate feeders exist.
(7i) Supply to consumers, other than industrial, in urban areas.
(i) Supply to agriculture consumers where there is a dedicated power
supply.
0) Supply to industrial consumers.
(k) Supply to schools and hospitals.
(1) Supply to defense and strategic installations.
(v) A distribution company shall prepare schedules of load disconnection,
which demonstrate this priority order and which rotate load disconnections
within the above groups in a non-discriminatory manner. The principle ofproportionality shall be kept in mind so as not to excessively burden aparticular consumer class.
6. WHEREAS, the Authority issued an Explanation to the Licensee under
Regulation 4(1) and 4(2) of NEPRA (Fine) Regulation, 2021 on January 03,
2023, on account of AT&C-based load shedding and failure to comply with
Performance Standards (Distribution) Rules. The salient points of the said
Explanation are reproduced below:
6. "WHEREAS, contrary to above, the Licensee is carrying out load sheddingin their service territories on the basis of the Aggregate Technical andCommercial (AT&C) losses policy following the criteria hereunder:
Category

Low
Loss

Medium
Loss

High
Loss

.VerJ:

,
Loss'

AT&C

Losses

Up
25
0'

to

25-35
(%)

35-50
(%,)

:.

,.'

Number.

. '.

dersp,:

Above 50(%.).v

Page 3 of 15

Load
Shedding
Hours
No.
of
Feeders0
I-/OUrS

3 Hours

6
Hours

7.5
Hours

/48/

150

96

237

- - .........-. 1964

7. WHEREAS, the load shedding carrying out by the Licensee following theabove said criteria is not in line with the provisions ofthe NEPRA Act, 1997,
and Performance Standards (Distribution) Rules, 2005, and has never beenrecognized by NEPRA. According to NEPRA Performance Standards Rules,
the Licensee can never do load she dding on its own until & unless instructedby NTDC. Hence, the Licensee is prima facie in violation of Rule 4(f) of
Performance Standards (Distribution) Rules, 2005 read with Section
21(2) (b) & (f) of the NEPRA Act and Article 11 of the terms & conditionsof Licensee 's License; and8. WHEREAS, from the data offew randomly selected feeders for the period
offour years FY2O]8-19 to FY2021-22), it is noted that their AT&C losses
have increased, the details of which are given in the table below.
Sr.
#

Name ofFeeder
1

I

2
3

.
PARSI
TRUST
SS
PIA
SOCIETYFAZALSHAFIQ%AT&C
losses in
July
2018
66.92

%AT&C
losses in
June
2022
80.40

5.44

17.27

11.83

64.57

72.18

7.61

Increaser;. Decrease...
,13.489. WHEREAS,from the above data it is evident that despite spending colossal
amount of billions of rupees under the investment head, the Licensee has
failed to take measures to improve the technical & financial health of 11 kV
feeders, rather they have found an easy way to carry out load shedding onsuch feeders based on AT&C policy; and10. WHEREAS, NEPRA vide letter No. NEPRA/DG(M&E)/LAD-01/15280
daledAugust 16, 2022, directed the Licensee to start load shedding at PMTlevel instead of feeder level basis through remote
disconnection/reconnection of the power supply as the Licensee itself
reported thai it has installed around fiJiy thousand (50,000) meters on its
all PMTs. In response, the Licensee vide letter dated September 06, 2022,
submitted that its distribution transformers (DTs) are covered with current
transformer (CT) operated meters and these meters cannot be operated
directly for disconnection/re-connection of load shedding at DT level. The
submissions of the Licensee were examined and observed that the Licensee
is achieving all commercial benefits through AMIIAMR meters, however, it
is not ready to provide relief to its consumers by carrying out load sheddingat PMT level. The Licensee also mentioned disconnection/re-connection to
Page 4 of 15

improve recover)' as one of the benefits of AMI/AMR meters. However, it
submitted number of challenges and made it unfeasible on account of load
management at PMT level. If this target cannot be achieved, then there isno signflcant benefit to the consumers by investing such a huge amount.
Moreover, a hearing in the matter was also held on October 04, 2022,
whereby the Licensee was directed to find a possibility for remote
disconnection/re-connection of meters through exploring design anddevelopment opportunities. Further, online meetings with the Licensee 's
team were also held and some solutions were also shared by the NEPRA
team in this regard. However, the compliance from the Licensee, regarding
the submission of PMT-wise load-shedding plan instead offeeder-wise isstill awaited Therefore, the Licensee has, prima facie non-complied withthe directions of the Authority; and"7. WHEREAS, the Licensee was given fifteen (15) days to submit reply against
the aforementioned Explanation. In response, the Licensee submitted its reply
vide letter No. KE/RA&GR/NEPRA/2023/032 dated January 28, 2023, andhearing in the matter was also held on May 18, 2023. Consequently, theAuthority after detailed deliberations concluded that the Licensee has failed toprovide any satLsfactory reply to the Explanation served to it; and8. WHEREAS, the Licensee has failed to satis the Authority with its replies andprima facia, has committed the violations of Rule 4(t of Performanceof theStandards (Distribution) Rules, 2005, read with Section 21(2fi'b,.) &NEPRA Act andArticle 11 of the ternis & conditions ofLicensee 's License, andis in non-compliance with the directions of the Authority. Therefore, theAuthority hereby rejects the response of the Licensee against the Explanation
served, and an Order dated September 11, 2023, is attached herewith,mentioning the reasons of rejection, andIn response, the Licensee vide its letter dated September 26, 2023, has submitted its
9.
reply, and interalia requested the Authority for an opportunity to be heard. The summarized
points of the submitted reply of the Licensee are as below:"Preliminary Objections:That the Said Notice read together with the Said Order does not consider or peruse thefacts, evidence and prevailing circumstances placed on record through submissions
made by KE vide its letters dated September 06, 2022, and January 18. 2023, and hence
as such contains legal infirmities of non-appreciation of facts and non-reading ofevidence. Further, without prejudice to it rights, KE hereby puts forward the following
preliminary objections with respect to the maintainability of the Said Notice forconsideration of NEPRA as under:a. That the Said Notice read together with the Said Order does not peruse the fact thatthe country overall has been facing exceptional circumstances / external challenges,
which have adversely impacted the macro-economic landscape of the country
resulting in increased inflation with corresponding exorbitant increase in electricity
tariff due to continuously increasing fuel prices affecting consumers payment
propensity, thus affecting recovery of bills by the Distribution Companies including
KE. Therefore, these unfortunate socioeconomic circumstances have resulted inPage 5 of 15

decline in recovery and consequent increase in commercial losses, thus resulting in
upward revision in load shed categories of certain feeders.
b. That even otherwise, it may please be noted that in addition to defaulters of regularbills, other external factors such as direct theft through illegal tampering of KE's
distribution network and illegal abstraction of power through electric meter, alsopose a significant dent on KE's recovery ratio resulting in loss of sales andaccordingly planned load management is necessitated to manage/restrict suchunwarranted pilferage of power.
c. That it is humbly submitted that KE as part of its load shed policy reviews the loss
profile of its feeder population on a quarterly basis, after which their loss categories
are revised, where necessitated, thus mitigating the impact of load shed.
d. That KE teams have been working on exploring the best possible solution for load
shed on PMT level to minimize the number of consumers affected from load shed
and as per directions of the Authority and is in discussions with vendors /consultants to identify and opt for the best possible solution as communicated vide
KE letter Ref # KE/RA&GRJNEPRA/2023/526 dated August 18, 2023.
Accordingly, issuance of the Said Notice read together with the Said Order ispremature and arbitrary in nature. Detailed response to this point is elaborated in
Para C(lIl) of this letter.
e. That it is humbly submitted that the policy(s) of the Government is binding upon
government departments, agencies, regulatory bodies, etc. who must adhere to its
provisions. Load-shed based on theft and recovery loss, i.e. on Aggregate Technical& Commercial (AT&C) losses was provided for in the National Power Policy 2013.
In this regard, it may please further be noted that the NEPRA PerformanceStandards (Distribution) Rules, 2005 were implemented in the year 2005 andprovides for technical load shedding. Accordingly, in absence of guidance forcommercial load shed, guidance for the same was drawn from the Government
notified Power Policy(s), which are also binding upon NEPRA, government
departments and KE. Here, it may please be noted that the same practice is also
being followed by other distribution companies across the country. Therefore, it ishumbly submitted that KE cannot be penalized for adhering to prevailing guidelines
for commercial load shed as per approved policy of the Federal Government.
f. That the show-cause notice for alleged violations of provisions i.e. Section 21(2)(b)& (f) of the NEPRA Act, Article 11 of the [(Es Distribution License read with Rule4(f) of the NEPRA PSDR 2005 and the Said Order does not correlate with thealleged violation as mentioned in the Said Notice and Said Order, hence is without
lawful effect and it is liable to be set-aside/withdrawn.
g. That the provisions of NEPRA PSDR 2005 do not bar KE from commercial loadshed. It is a well-settled principle of law that anything not expressly prohibited
under the law is permitted and the same cannot be penalized for it, especially whilst
adhering to the policy guidelines duly approved by the Federal Government. Hence,
the Said Notice and Said Order are liable to be set-aside/withdrawn in i/mine.

Page 6 of 15

IcE's RESPONSE To THE CONTENTS OF THE NEPRA ORDER (THE SAID
ORDER)
Without prejudice to the foregoing and in furtherance to the preliminary objections of
this response, KE humbly submits its response to the Analysis and Findings mentioned
in Paras 9 to 14 of the Said Order:
I. In response to Para 9, 10 and 11 of the Said Order, it is humbly submitted that there
are two aspects to load shed namely technical load shed and commercial load shed.
Technical load shed pertains to load-shed or load-management due to generation
shortage and transmission constraints, which is complied with by both NTDC and
KE in the perspective of being system planners and operators of their respective
service territory. Here, it is humbly submitted that with capacity additions ingeneration and transmission, no load shedding is being carried out due to generation
shortage or transmission constraints and in case of any load shed due to generation
shortage or transmission constraint carried out, the same is communicated to
NEPRA and due relief is provided to consumer class faced with additional load
shed. With respect to commercial load shed, the same is dependent upon loss andrecovery profile of feeder(s), which among others have been severely impacted by
the challenging socio-economic conditions and increase in consumer-end tariffs
over the last 2 years, thus resulting in a major decline in consumers' propensity topay.
Further, the other aspect of load shed relates to load shed being implemented on
distribution level by the XW-DlSCOs and KE in their respective service territories
based on AT&C Losses of feeders, which can be substantiated by the fact that thesame has been acknowledged by the Honorable Supreme Court in its Judgement in
Para 36 of the Human Rights Cases No.14392/20 13 & 790-G/2009 in the matter of
unprecedented load shedding and increase in electricity prices dated November 26,
2013 as well as affirmed by the Honorable Authority in Para 53.4 KE's Multi-Year
Tariff (MYT) determination dated March 20, 2017 and Para 19.7 of the Review
Decision of the Authority in the matter of KE's MYT dated October 09, 2017, andthe load shed advertisement published by the Power Division in the year 2015 forcompliance by XW-DlSCOs, as also acknowledged by the Authority in Para 12 of
the Said Order. Further, when the PMT based load shed is rolled out, the same will
also be implemented on the basis of AT&C loss profile of PMTs instead of feeders.
Further regarding load shedding being implemented on 25% of KE's feeders, it ishumbly submitted that KE through careful planning and conscious implementationof its AT&C loss-based load shed policy followed by targeted investments has beensuccessfully able to exempt over 70% of its territory from load shed which at thetime of privatization stood at 6% only.
Moreover, it may please be noted that KE in compliance with Rule 4(f) of the
NEPRA Performance Standards Distribution Rules (PSDR), 2005 prepares its load
hed schedules which are carried out in a non-discriminatory manner within aparticular class of consumers which encompasses its functions as a system planner,
operator, and distributor/supplier of electric power by virtue of separate licenses
KE possesses for all of its three (03) business segments, thus aptly managing
demand in its service territory on the basis of generation shortage, transmission
constraints and as well as performing equitable load shed.
Page 7 of 15

In view of the foregoing KE humbly denies any contravention to Rule 4(f) of the
NEPRA Performance Standards (Distribution) Rules, 2005.
II. In response to Para 12 and 13 of the Said Order, it is humbly submitted that a major
component of AT&C-loss based load shed policy is the recovery ratio based on
which the feeders are categorized into respective load shed categories. In view ofthe foregoing, it may please be considered that, over the years the paying propensityof the consumers has been significantly impacted due to the ongoing economic
condition of the country. This has led to significant challenges on the recovery
front, distorting the recovery ratio, especially in the last 12 months, consequently
affecting the loss profile of feeders. In this respect, KE, in line with Clause 8.2.4 of
the NEPRA Consumer Service Manual promptly disconnects all suchdefaulters/non-payers of bills. However, loss of sales occurs in areas which arehighly infested with illegal kunda connections and where illegal theft of electricity
is rampant. To combat this menace, KE has been constantly converting its barecables into Aerial Bundled Cables (ABCS) to restrict access and conducting kunda
removal drives regularly as part of its governance measures.
III. In response to Para 14 of the Said Order, it is humbly submitted that as
communicated vide KE letter # KE/RA&GRJNEPRAI2O23 1526 dated August 18,
2023, KE in line with the directions of the Honorable Authority to carry out load
shed at Distribution Transformers (DT) level through remote
Disconnection/Reconnection (DC/RC) is in discussions with thevendors/consultants to identify and opt for the best possible solution. In this respect
and as communicated vide KE # letter KE/RA&GRINEPRA/2023/526 dated
August 18, 2023, KE shall share a road map outlining the details of the plan for
implementation of load shed at DT level. In view of foregoing, KE humbly requests
the Authority to keep further proceedings in the instant matter in abeyance until
submission of detailed plan by KE.
In order to proceed further as per law, a hearing in the matter of SCN issued to the10.
Licensee was scheduled and held on January 03, 2024, wherein, the CEO KE along with his
team participated and made the following submissions:i.

Load Shedding is a complex issue and KE is committed to meet the growing
demand of Karachi.

ii.

The detailed roadmap for reduction of losses and ultimately reduction of load
shedding have been submitted by KE in Tariff determination.

iii.

At present, in the service territory of KE, around 70% feeders are exempted fromload shedding and by 2030, KE is targeting to exempt 95% feeders free from load
shedding.

iv.

There is no discrimination in selecting those 70% feeders, as these feeders are
purely based on actual data.

v.

In order to move from 70% to 95%, operational measures are being taken such as
removal of hook connections, installation of ABC cables, etc.

cc

Page 8 of 15

vi.

11.

KE is focusing on PMT level load shedding and efforts are being taken in thisregard.

FINDINGS/ANALYSIS:i)

The Licensee has submitted that the Said Notice read together with the Said
Order does not peruse the fact that the country overall has been facing
exceptional circumstances/external challenges, which have adversely impacted
the macro-economic landscape of the country resulting in increased inflation
with corresponding exorbitant increase in electricity tariff due to continuously
increasing fuel prices affecting consumers payment propensity, thus affecting
recovery of bills by the Distribution Companies including the Licensee.
Therefore, these unfortunate socioeconomic circumstances have resulted in
decline in recovery and consequent increase in commercial losses, thus resulting
in upward revision in load shed categories of certain feeders.
The Authority has considered the submissions of Licensee and observes that the
aforementioned challenges highlighted by the Licensee do not absolve theLicensee from its responsibility to manage its operations efficiently. It is amatter of fact that certain factors such as increased inflation and rising fuelprices may affect consumer payment propensity, however, it does not justify theinability of the Licensee to effectively recover bills. The Licensee should have
implemented strategies to mitigate these challenges, however, it adopted an easy
way to burden its consumers by carrying out AT&C-based load shedding inorder to control its losses, which unfairly burden consumers and could havebeen avoided through better management practices and governance. Moreover,being a prudent utility, the Licensee is mandated to provide un-interrupted
power supply to its consumers, however, it failed to do so.

ii)

The Licensee has submitted that in addition to defaulters of regular bills, otherexternal factors such as direct theft through illegal tampering of the Licensee's
distribution network and illegal abstraction of power through electric meter,
also pose a significant dent on the Licensee's recovery ratio resulting in loss ofsales and accordingly, planned load management is necessitated to
manage/restrict such unwarranted pilferage of power.
The Authority has considered the submissions of the Licensee and observes thatbeing a distribution licensee, the Licensee should have implemented robust
measures to prevent such occurrences rather than resorting to load management
strategies that penalize law-abiding consumers by fully disconnecting thefeeders. Moreover, AT&C-based load shedding should not be used as a primarymeans to address theft and tampering issues; rather, the Licensee should go forindividual disconnection of the defaulters, seek support from law enforcing
agencies and provincial government, and prioritize investmentlO&M funds
efficiently to curb these illegal activities while ensuring fair, equitable, anduninterrupted distribution of electricity among all consumers.

iii)

The Licensee has submitted that its teams have been working on exploring thebest possible solutions for load shed on PMT level to minimize the number ofconsumers affected from load shed and as per directions of the Authority and isPage 9 of 15

in discussions with vendors/consultants to identify and opt for the best possible
solution.
While considering the submissions of the Licensee, the Authority observes thatthe efforts taken by the Licensee with regard to load shed at PMT level areconsidered. In this way, a small fraction of the consumers will be affected,
however, that practice is still against the NEPRA laws. Rather than shedding
the load on an entire feeder is better than shedding the load through PMTs, anumber of consumers will get relief as only the worst payingldefaulter PMTs
will be targeted. However, even if a single consumer is paying the bill, he isentitled to the provision of uninterrupted and reliable power supply irrespectivethat the consumer is connected to a PMT or a feeder.
iv)

The Licensee has submitted that the policy(s) of the Government is binding
upon government departments, agencies, regulatory bodies, etc. who must
adhere to its provisions. Load-shed based on theft and recovery loss, i.e. on
Aggregate Technical & Commercial (AT&C) losses was provided for in the
National Power Policy 2013.
The Authority has considered the submissions of the Licensee and is of the viewthat National Power Policy 2013, has been repealed and been superseded by
National Electricity Policy 2021, wherein there is no such provision of AT&Cbased load shedding rather NEP-2021 clearly envisages that such type of load
shedding will be gradually decreased, however, the Licensee is carrying out
such so-called load shedding since many years, which is against the spirit ofeven NEP-2021.

v)

The Licensee has further submitted that the show-cause notice for alleged
violations of provisions i.e. Section 21(2)(b) & (f) of the NEPRA Act, Article
11 of the Licensees Distribution License read with Rule 4(f) of the NEPRAPSDR 2005 and the Said Order does not correlate with the alleged violation as
mentioned in the Said Notice and Said Order, hence is without lawful effect andit is liable to be set-aside/withdrawn.
The Authority has considered the submissions of the Licensee and observes that
the Order dated September 11, 2023, is speaking order and extensively argued
on the basis of alleged violations. The provision relating to Section 21 of the
NEPRA Act, 1997, indicates that the failure of DISCO to provide requisite
service to its territory in accordance with the eligibility criteria performancestandards, safety, health, and environment protections which are also madeobligatory under article II of ICE distribution licensee and PerformanceStandard Rules.

vi)

The Licensee has also submitted that the provisions of NEPRA PSDR 2005 do
not bar the Licensee from commercial load-shed. It is a well-settled principle oflaw that anything not expressly prohibited under the law is permitted and thesame cannot be penalized for it, especially whilst adhering to the policy
guidelines duly approved by the Federal Government. Hence, the Said Noticeand Said Order are liable to be set aside/withdrawn in limine.
Page 10 of 15

The Authority has considered the submissions of the Licensee and observes thatthe issue of commercial load-shedding has been in conformity with the qualityof service which must be satisfied and a performance failure thereof on accountof increased commei-cial based load-shedding cannot be left on the discretion of
the Licensee. In this regard, NEPRA Licensing (Distribution) Rules, 1999, and
NEPRA Consumer Eligibility Criteria (Distribution Licensees) Regulations,2022 state as follows:
NEPRA Licensing (Distribution) Rules, 1999

9. Obligation to connect and supply:The licensee shall connect and supply electric power to any consumer(8)
satisfying the consumer eligibility criteria specified in the NEPRA rules andregulations, who seeks connection and supply of electric power in a manner notinconsistent with the consumer service manual or the terms of the distribution
licence or which does not result in the licensee being in breach of the Laws or
the applicable documents.
NEPRA Consumer Eligibility Criteria (Distribution Licensees)
Regulations, 2022
Non-discriminatory and equitable treatment. - (I) A distribution licensee
11.
shall ensure that all applicants and consumers are treated in a nondiscriminatory, fair, transparent and just manner.
(2) Where an applicant does not meet any part of the eligibility criteria, thedistribution licensee shall explain the relevant deficiency in writing within ten
working days and provide reasonable opportunity to the applicant to recti' thesame before a final decision on the application.
vii)

The Licensee has submitted that the law does provide for technical load-shedbut at the same time does not restrict the Licensee from conducting commercial
load-shed in compliance with Government notified Power Policy(s). Hence, theSaid Notice and Said Order have no legal sanctity.
The Authority after considering the submissions of the Licensee is of the view
that, likewise technical load shedding is not to be undertaken with theunderstanding that such ability is unfettered, unregulated, and outside thepurview of the Regulator. Moreover, the Authority also observes that National
Power Policy 2013, has been repealed and superseded by National Electricity
Policy 2021, wherein there is no such provision of AT&C-based load shedding
rather NEP-2021 clearly envisages that such type of load shedding will be
gradually decreased, however, the Licensee is carrying out such so-called load
shedding since many years, which is against the spirit of even NEP-2021.

viii)

The Licensee has submitted that there are two aspects to load shed namely
technical load shed and commercial load shed. Technical load shed pertains toload-shed due to generation shortage and transmission constraints, which isPage 11 of 15

complied with. The Licensee has further submitted that with capacity additions
in generation and transmission, no load shedding is being carried out due togeneration shortage or transmission constraints and in case of any load shed due
to generation shortage or transmission constraint carried out the same iscommunicated to NEPRA and due relief is provided to consumer class facedwith additional load shed. With respect to commercial load shed, it is humbly
submitted that the same is dependent upon loss and recovery profile of feeder(s),which among others have been severely impacted by the challenging socioeconomic conditions and increase in consumer-end tariffs over the last 2 years,
thus resulting in a major decline in consumers' propensity to pay.
After considering the submissions of the Licensee, the Authority is of theconsidered opinion that the licensee's responsibility extends beyond merelycomplying with generation and transmission constraints. Moreover, despite
claims of capacity additions in generation and transmission, the Licensee shouldhave implemented proactive measures to address the challenges posed by thesocio-economic conditions and consumer-end tariff increases over the past two
years. Merely communicating instances of load shedding due to generation
shortage or transmission constraints to NEPRA does not absolve the Licenseeof its obligation to ensure reliable and uninterrupted electricity supply to
consumers. The decline in consumer's propensity to pay may indeed be a factor,
but the Licensee should have adopted strategies to mitigate these challenges
rather than resorting to load shedding, which disproportionately affects
consumers and exacerbates their financial burden. Apart from this, the Licensee
submissions clearly indicate an admittance that it carries out commercial load
shed which is in violation of NEPRA laws and has never been recognized by
NEPRA. Being a distribution and supply licensee, the Licensee is obligated toprovide power supply to all the consumers on a non-discriminatory basis, which
it has failed to do so.
ix)

The Licensee has submitted that the other aspect of load shed relates to the load
shed being implemented on distribution level by the XW-DISCOs and theLicensee in their respective service territories based on AT&C Losses of
feeders, which can be substantiated by the fact that the same has been
acknowledged by the Honorable Supreme Court in its Judgement in Para 36 of
the Human Rights Cases No.14392/20 13 & 790-G12009 in the matter of
unprecedented load shedding and increase in electricity prices dated November
26, 2013, as well as affirmed by the Honorable Authority in the Licensee's
Multi-Year Tariff (MYT) determination dated March 20, 2017.
The Authority has considered the submissions of the Licensee and is of theconsidered opinion that the honorable Supreme Court, held that efforts must be
made to provide uninterrupted supply of electricity. However, if load sheddingis the only way out, it should be administered without having any distinction
between rural and urban areas as well as domestic, commercial, and industrial
sections. By no stretch of imagination, the Supreme Court validated or allow
AT&C-based load shedding. Thus, the Licensee should have devised a strategy
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to penalize only the non-paying consumers by disconnecting them in line withthe criteria and timelines given in the Consumer Service Manual (CSM), rather
than opting for load shedding on the entire feeder and penalizing the paying
consumers as well. It is pertinent to mention here that as per Clause 8.2.4 of theCSM, in case of non-receipt of payment and upon expiry of the due date givenon the second month's bill, the supply of the defaulting premises shall be
disconnected. Further, the Authority is of the view that the reference of theSupreme Court (SC) is not relevant and can be distinguished. The Licensee
cannot hide behind the SC judgment based on self-serving interruptions to coverinefficiencies and failure in the provision of distribution services. Moreover, theMYT of the Licensee allowed the Utility to maximize its profit by higher sales
growth, therefore an incentive was provided to the Licensee to minimize load
shedding in order to increase its sales and earn higher profits, which would also
benefit the consumers in the shape of exemption from load shedding andprovision of reliable supply.
x)

The Licensee has submitted that through careful planning and conscious
implementation of its AT&C loss-based load shed policy followed by targeted
investments, it has been successfully able to exempt over 70% of its territory
from load shed which at the time of privatization stood at 6% only. Additionally,
with respect to announcing of load shed policy to be implemented across thecountry unanimously, kind attention is drawn to Para 53.4 of the License&s
MYT determination dated March 20, 2017, wherein it has been duly
acknowledged by the Authority that the same principle/practice for load shed isbeing followed by other distribution companies and it was stated that to address
this issue, separate proceedings shall be initiated in due course, which are still
pending conclusion.
The Authority while considering the submissions of the Licensee observes thatexempting over 70% of its territory from load shedding is a claim of theLicensee which needs to be verified. However, the Licensee is still
overburdening the remaining 30% class of its consumers in a manner which isincorporated with the NEPRA laws. Moreover, the Licensee should carry out
load shedding across its all consumers only in case of any generation shortageor transmission constraints. Further, citing provisions from previous
determinations to justify current practices does not absolve the Licensee of its
responsibility to adhere to NEPRA laws and ensure equitable treatment of all
consumers. Although, the provision quoted by the Licensee does not allow the
Licensee to carry out such load shedding. It can be concluded that the Licensee
lacks serious understanding with respect to this issue.
As far as para 53.4 of the MYT of the Licensee is concerned, the Authority
categorically highlighted that the load shed policy of DISCOs is inconsistent
with the NEPRA Performance Standards (Distribution) Rules, and will beseparately dealt. Therefore, it has nothing to do with subject proceedings.
Moreover, the Authority also directed the licensee to take certain measuresinstallation of AMR meters, ABC cable, etc, in order to reduce and graduallyeliminate load shedding in Karachi within three years. However, the licensee has
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failed to do so, as the practice of AT&C is continued even after the lapse of said
MYT.
xi)

The Licensee has submitted that a major component of AT&C-loss based load
shed policy is the recovery ratio based on which the feeders are categorized into
respective load shed categories. In view of the foregoing, it may please beconsidered that, over the years the paying propensity of the consumers has beensignificantly impacted due to the ongoing economic condition of the country.
This has led to significant challenges on the recovery front, distorting therecovery ratio, especially in the last 12 months, consequently affecting the loss
profile of feeders.
While considering the subniissions of the Licensee, the Authority observes that
attributing economic conditions alone overlooks potential internal inefficiencies
and shortcomings in the Licensee's operations and management. Moreover,instead of solely relying on recovery ratios as the basis for load-shedding
policies, the Licensee should explore alternative measures to address financial
challenges, such as improving billing and collection processes, reducing
technical losses, and enhancing consumer awareness regarding the importanceof timely payments. Additionally, the Licensee should prioritize transparency
and accountability in its operations to rebuild consumer trust and ensure fairtreatment for all consumers regardless of economic conditions.

xii)

The Licensee has also submitted that in line with Clause 8.2.4 of the NEPRA
Consumer Service Manual, the Licensee promptly disconnects all suchdefaulters/non-payers of bills. However, loss of sales occurs in areas which arehighly infested with illegal kunda connections and where illegal theft ofelectricity is rampant. To combat this menace, the Licensee has been constantly
converting its bare cables into Aerial Bundled Cables (ABCS) to restrict accessand conducting kunda removal drives regularly as part of its governancemeasures.
The Authority has considered the submissions of the Licensee and observes that
despite the aforementioned efforts being taken by the Licensee, there is still
AT&C-based load shedding on 30% of the Licensee's feeders. In light of theweekly monitoring of load shedding reports by the Regional Office, Karachi, it
has been observed that the Licensee is not even following its so-called AT&Cbased load shedding criteria and the consumers are experiencing extended hoursof load shedding even more than their scheduled hours. Therefore, the claims of
the Licensee seem not valid.

12.

Conclusion:

It is quite evident from the aforementioned provisions of applicable documents that it isobligatory for KE being a prudent distribution utility to provide and ensure fair, reliable,
equitable, and uninterrupted distribution of electricity services to its territory inaccordance with the eligibility criteria, performance standards, safety health, andenvironment protection which are also made mandatory under Article 11 of KE
Distribution Licence.

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13.

Decision:
Keeping in view the submissions of the Licensee, the evidence available on record, andprovisions of relevant NEPRA laws and terms and conditions of distribution license
issued to the Licensee, the Authority hereby rejects the response of the Licensee against
the served Show Cause Notice dated September 11, 2023, and imposed a fine of Rs 50
Million on the Licensee under NEPRA Act, and NEPRA (Fine) Regulations, 2021 forviolation of Rule 4(f) of Performance Standards (Distribution) Rules, 2005, Rule 9(8)of NEPRA Licensing (Distribution) Rules, 1999, Regulation 11(2) of NEPRA
Consumer Eligibility Criteria (Distribution Licensees), Regulations, 2022, read with
Section 21 (2)(b) & (f) of the NEPRA Act, and Article Ill of the terms & conditions of
its Distribution License. Additionally, the Licensee is non-compliant to the directionsof the Authority.

AUTHORITY
Rafique Ahmed ShaikhMember (Technical)

Engr. Maqsood Anwar Khan
Member (Licensing)Mathar Niaz Rana (nsc)Member (Tariff)

Amina Ahmed
Member (Law)

Waseem Mukhtar
ChairmanlIEPRAAUTHORITY

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