A litmus test for reform: reading between the lines of KE’s MYT

As Pakistan grapples with an urgent need to revitalize its economy, reform its state-owned enterprises, and attract foreign investment, the recent approval of K-Electric’s Multi-Year Tariff (MYT) could very well be a watershed moment—both for the energy sector and investor confidence in the country.

NEPRA’ s determinations of the seven-year MYT for K-Electric provides something the sector has long been starved of: predictability. In an environment where policy and regulatory volatility has historically discouraged long-term capital commitments, this approval serves as a strong signal to both local and international investors that the government is willing to create space for structured reform and fiscal discipline. This couldn’t be timelier, especially as Pakistan’s Special Investment Facilitation Council (SIFC) rolls out its plan to revamp State Owned Enterprises and stimulate private sector participation across key sectors.

Yet, the MYT hasn’t been without controversy. K-Electric filed its MYT petition in December 2023, and the final decision came nearly two years later in May 2025. While the approval marks progress, the long timeline reflects the broader complexities and procedural uncertainties that often challenge investor confidence in Pakistan’s energy sector. Even after extensive stakeholder consultations and hearings, the public discourse that followed indicates that consensus on such critical reforms remains fragile—a move that creates mixed signals and undercuts the very predictability that MYT aims to establish. But while the political theatre plays out, one fact remains: no other utility in Pakistan operates under the same commercial exposure as K-Electric. Unlike government-backed DISCOs, KE operates without sovereign guarantees, and all recovery losses directly impact its private shareholders. There are no bailout packages, no subsidies to cover deficits, and no cross-subsidization schemes to offset losses.

Since privatization in 2005, KE has poured over USD 4.0 billion across the value chain for improving Karachi’s power supply infrastructure—more than twelve times its cumulative profit over the same period. In fact, investors have not received a single rupee in dividends in the last 18 years. The company has halved its transmission and distribution losses from 34.2% to 16%, outperforming many public utilities. This operational turnaround, however, hasn’t translated into financial reward. KE’s return on equity currently hovers at less than 2%, far below any reasonable benchmark—especially when the underlying investment is in dollars and the returns are absorbed in rupee volatility.
Another notable shift in the approved MYT is NEPRA’s move to partially recognize recovery shortfalls within the tariff framework. This reflects a more grounded regulatory outlook—one that acknowledges the operational realities of a metropolis mammoth like Karachi, where power theft and non-payment remain persistent challenges. The situation is further complicated by the recent rejection of a government-backed bill that sought to classify power theft as a cognizable offence—making it even harder to enforce accountability on the ground. It’s not a handout—it’s a reflection of the on-ground challenges and a step toward keeping the system financially stable.

Much has been made of the tariff figure approved under the MYT, but it’s critical to note that this does not translate into a spike in consumer bills in the current environment. Under the federal government’s current uniform tariff policy, the difference is absorbed through the Tariff Differential Subsidy (TDS), ensuring that end-user prices remain broadly aligned across the country. In effect, KE’s customers will continue to pay rates comparable to those in other regions, unless or until that subsidy policy is restructured. The tariff is a technical benchmark for financial viability, not a consumer price tag.

The approved MYT, which underpins K-Electric’s $2 billion investment plan through 2030, is designed to address this imbalance. It anchors capital injections into critical upgrades: 1,282 MW of new renewable generation (solar, wind, and hydel), 85 new grids, nearly 2,000 kilometers of transmission lines, and a vastly improved distribution backbone. This isn’t just about Karachi—it’s about testing whether Pakistan can sustain a viable, investor-led utility model. If KE fails, it sends a grim signal to all future private participation in energy, infrastructure, and utilities.

In a market that’s still largely defined by circular debt and politically driven subsidies, KE’s model stands apart. And that’s precisely why the MYT matters. It offers the first credible platform in years for a utility to operate under a forward-looking, performance-linked regime without shifting the burden onto the taxpayer. Policymakers must resist the temptation to politicize the outcome. Instead, they should leverage it to build a case for similar reforms across all DISCOs.

Pakistan is at an inflection point. Its economy can no longer afford short-term populism at the cost of long-term solvency. The K-Electric MYT isn’t just a tariff—it’s a litmus test for whether Pakistan can be taken seriously as an investment destination. Let’s not squander this opportunity.

The writer is an energy sector analyst with keen interest in the power sector especially renewable energy, policy development and challenges

Disclaimer: The views expressed here are solely the author’s and do not necessarily reflect the opinions and beliefs of ARYNews or its management.