Uniform UoSC plan: Power regulator questions cross-subsidy component

ISLAMABAD: The National Electric Power Regulatory Authority (NEPRA) on Wednesday raised serious questions over the proposed cross-subsidy component in the government’s plan for uniform Use of System Charges (UoSC), signaling strict scrutiny before issuing its final determination.

The concerns were voiced during a public hearing on the federal government’s motion seeking uniform application of UoSC across all distribution companies (DISCOs), including K-Electric. Industry stakeholders strongly opposed the proposal, terming the charges excessively high and burdened with cross-subsidies unrelated to actual transmission and distribution costs.

The hearing, held at NEPRA headquarters in hybrid mode, was attended by officials from the Power Planning and Monitoring Company (PPMC), the Independent System Market Operator (ISMO), and the Ministry of Energy, along with representatives from FPCCI, APTMA, industrial consumers, and trade bodies.

READ MORE: Federal budget FY2026–27: Govt to slash power sector subsidies by around 20pc

The government filed the motion following NEPRA’s determination of grid-related UoSC for eleven ex-WAPDA DISCOs on December 18, 2025. With the Competitive Market Operations Date (CMOD) declared on January 22, 2026, and wheeling auction guidelines issued the same day, the government is now seeking uniformity in charges as mandated under the National Electricity Plan.

Under the proposal, uniform UoSC has been set at Rs6.69 per kWh for 132kV (B-4 category), Rs8.51 per kWh for 11kV (B-3), and Rs5.60 per kWh for 0.4kV (D-2(b)), along with a uniform Debt Servicing Surcharge (DSS) of Rs3.23 per kWh across all categories and DISCOs.

Officials explained that the policy framework involves applying XWDISCO charges uniformly to all bulk power consumers, addressing resulting financial gaps, implementing interim provisions under SD-88, and establishing an inter-DISCO settlement mechanism.

However, Rehan Javed, representing FPCCI, raised fundamental concerns about the absence of any cap or formula governing UoSC. He noted that under the current framework — comprising the National Electricity Policy 2021, CTBCM Market Commercial Code 2022, and NEPRA Open Access Regulations 2022 — there is no ceiling on wheeling charges, exposing market participants to unlimited cost pass-through. He warned that UoSC levels approaching 3.5 cents per unit are unacceptable for industry and could render the Competitive Trading Bilateral Contract Market (CTBCM) framework unbankable. He also cautioned that under Section 31 of the NEPRA Act, the regulator is bound to implement cabinet-approved policy directives, limiting its ability to shield consumers from future cost escalations.

Javed further questioned the inclusion of a Rs3.23 per unit Debt Servicing Surcharge, stating it was not explicitly mentioned in the government’s motion and lacks regulatory clarity for investors.

Sohail Zaidi supported these concerns, warning that high UoSC levels would deter market participation, while Tanveer Bari criticized the proposal, arguing that over 80 percent of the charges comprise stranded costs and cross-subsidies unrelated to actual service delivery.

Bari emphasized that the lack of detailed cost breakdown in DISCO petitions makes independent verification difficult and warned that high charges would undermine industrial competitiveness, particularly for exporters.

Zeeshan Ali called for uniform charges across all consumer categories, while APTMA’s Asim Riaz compared electricity wheeling costs with gas transmission tariffs, noting that the latter equate to roughly 1 cent per kWh — significantly lower than proposed electricity charges. He also demanded detailed loss calculations to justify additional cost components.

Umar Haroon of ISMO disputed industries claim and said they have done working and even with this UoSC charge it is feasible for industries Officials from the Power Division urged NEPRA to incorporate the federal cabinet’s recent decision to remove cross-subsidy from industrial tariffs, arguing that the earlier determination did not reflect this policy shift.

PPMC officials clarified that K-Electric has not yet been included in the current UoSC calculation due to ongoing legal disputes over its tariff, but will be incorporated once the issue is resolved.

During the proceedings, NEPRA members repeatedly questioned the methodology and calculations underpinning the proposed charges, particularly the cross-subsidy component, indicating that the Authority will thoroughly examine the petition before issuing its final determination.

Copyright Business Recorder, 2026