ISLAMABAD: The government has shelved its plan to rebase electricity tariffs from January 1 each year, instead of the current July 1 timeline, after the International Monetary Fund (IMF) refused to endorse the scheme, well-informed sources told Business Recorder.
On January 17, 2025, the Economic Coordination Committee (ECC) of the Cabinet had approved the Power Division’s tailored plan aimed at shifting financial shocks onto consumers in winter, when consumption and bills are lower compared to the summer months.
Sources said that while the Finance Ministry had conveyed no objection to the Power Division’s proposal, understanding that it had no financial or subsidy implications, it suggested the Power Division discuss the proposal with development partners, including the IMF, World Bank, and Asian Development Bank (ADB), as part of reform initiatives before submitting it to the ECC.
Significant cut in power tariff likely by end-June
In its summary, the Power Division explained that the National Electric Power Regulatory Authority (NEPRA) determines the consumer-end tariff for the Distribution Companies (Discos) and K-Electric, as per Section 31 of the Regulation of Generation, Transmission and Distribution of Electric Power (Amendment) Act, 2021, read with Rule 17 of the Nepra (Tariff Standards and Procedure) Rules, 1998. The most recent uniform tariff was notified by the federal government via SRO No. 1039(I)/2024 on July 14, 2024.
According to Nepra (Tariff Standards and Procedure) Rules, 1998, and Part 5 of the NEPRA Determination of Consumer-End Tariff (Methodology & Process) Guidelines, 2015, Discos are required to submit their minimum filing requirements for tariff determination by January 31 of each year.
The submission is followed by internal meetings, a public hearing, tariff determination, and notification by the government. Given recent annual tariff determinations, the rebasing has been notified by the government in July each year, with effect from July 1.
Power Division argues that it is an unfortunate coincidence that consumers face high Fuel Charges Adjustments (FCAs) and the annual tariff rebasing simultaneously in the summer months, the Power Division admitted in its proposal.
The Power Division also acknowledged that this tariff increase, coupled with higher consumption, leads to a significant hike in consumer electricity bills during the summer, causing public dissatisfaction and nationwide protests. The Power Division believes the issue could be streamlined by adjusting the timing of the annual re-basing, ensuring stable and sustainable electricity prices throughout the year.
The National Electricity Plan Strategic Directive 8 stipulates that the regulator must revisit the “Guidelines for Determination of Consumer-End Tariff (Methodology and Process), 2015,” to enable the alignment of regulatory proceedings with planning activities, as well as rate and tariff determinations.
After explaining the background of the proposal, the Power Division sought approval from the ECC on the following: (i) Policy guidelines may be issued to NEPRA to revise the annual tariff determination process timelines by amending the relevant legal and regulatory framework so that rebasing is notified with effect from January 1 each year, after completing all regulatory proceedings; and (ii) The Power Division may be authorized to approach NEPRA for implementing these policy guidelines.
However, when the development partners, including the IMF, were consulted on the plan, they did not support it. They recommended that the government focus on ongoing reforms and resolving current issues instead of introducing new initiatives.
Sources further stated that after receiving this discouraging response from the IMF, the plan has been shelved, and the requisite guidelines have not been issued to NEPRA. As a result, the existing rebasing mechanism will continue.
Copyright Business Recorder, 2025
Comments