Net-metering consumers: Nepra may hold public hearing on revised buyback rates

ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) is likely to hold a public hearing on the revised buyback rates for net-metering consumers as it receives guidelines from Power Division after formal approval from the federal cabinet, well-informed sources told Business Recorder.

The decision of Economic Coordination Committee (ECC) of the Cabinet on a summary of Power Division as additional item, has sent shock waves to the existing net metering consumers and intended consumers as well the companies which are installing solar PV panels.

There is a strong possibility that consumer groups may challenge the government’s decision which supports clean energy in the country.

Govt urged to withdraw abrupt changes in net metering policy

On March 13, 2025, Power Division briefed the forum that the net metering regime was introduced by Nepra in 2015 as a policy tool to simultaneously address the prevailing energy shortfall and accelerate the penetration of renewables in the country.

Till date, this regime has significantly accelerated the deployment of distributed solar energy in Pakistan. Initially the policy targeted residential, commercial, and industrial consumers with the agreement term of three years.

However, in 2017, the scope of policy was further enhanced with inclusion of the agricultural segment, with an extended agreement term to 7 years for all applicable categories.

In 2018, bulk and general services were also permitted to install net-metered connections, and the capacity of distributed generation facility was capped at 1.5 times of the sanctioned load for applicable categories.

The policy operates on a net-metering mechanism i.e. units exported by the net-metering consumer during peak/off-peak hours are netted off against the units supplied by the respective DISCOs during peak/off-peak hours.

Any excess units supplied by the net- metering consumer to the DISCOs are credited to the respective consumer in the next billing cycle or paid by the DISCOs on quarterly basis.

Any excess units supplied by the DISCOs to the net-metering consumer are billed in accordance with the applicable peak/off-peak tariff. Given the increase in electricity prices, decline in solar panel prices coupled with lucrative incentives being offered under net-metering policy, the net metering capacity witnessed substantial increase from 5 MW in 2017 to an installed net- metered capacity of 2,451 MW by the end of FY-2024 (4,135 MW as on Dec-2024).

If the current rate of deployment continues, total net-metered installations are projected to exceed 14,000 MW approx. by FY-2034.

As per the latest tariff determinations of Discos for FY 2024-25, around 67% of the revenue requirement represents fixed/unavoidable costs of the sector including capacity charges of power producers and fixed expenditure of power distribution and transmission entities whereas the remaining 33% cost denotes fuel/variable part. This means that major portion of power generation invoices is paid irrespective of level of electricity production or consumption.

On the other hand, the consumer-end tariff is structured to recover only 6% of the determined cost through fixed charges whereas remaining 94% of the cost is recovered through variable charges and any avoided demand will have detrimental impact on fixed costs.

The Power Division further briefed the forum that under the current net-metering regime, the net-metering consumers are avoiding the fixed charge component. This shift, along with the increase in CPP, decline in energy sales, and decrease in recovery of fixed charges, has contributed to the rise in electricity tariffs.

The quantum of net-metering capacity has resulted in the sales reduction of approx. 3.2 billion kWh in FY-2024, impacting other consumers with an additional financial burden of approx. Rs 101 billion resulting in average increase of approx. Rs.0.9/kWh in consumer tariff. “The financial impact on existing grid customers is projected to increase with an expected sales reduction of 18.8 billion kWh in FY-2034, impacting grid customers with an added burden of approx. Rs 545 billion resulting in average increase of approx. Rs.3.6/kWh in consumer tariff,” the sources quoted Power Division as saying.

Additionally, pursuant to the proposed IGCEP 2025, the cumulative quantum of net-metering additions of more than 8,000MW till FY-2034 had also been considered as forced addition thereby posing a detrimental impact on the principle of least cost expansion.

According to the Power Division, in areas with high penetration of Distributed Generation (DG), challenges such as reverse power flow and voltage fluctuations can lead to grid instability and potential infrastructure damage.

Additionally, maintaining a stable frequency becomes increasingly difficult as variable and intermittent renewable energy sources feed into the grid. Beyond these technical concerns, the existing net-metering framework also raises pricing and equity issues.

The current buyback rate and settlement mechanism result in a cost shift to other grid consumers, making netting-off units a suboptimal approach for grid consumers. As more consumers adopt net-metered connections, disadvantaged communities-who cannot afford to install DG systems-bear a disproportionate burden through higher energy bills.

Copyright Business Recorder, 2025