Proposed amendments to NEP Strategic Directive-87: PD facing strong resistance from provinces

ISLAMABAD: The Power Division is facing strong resistance from provincial governments over proposed amendments to Strategic Directive-87 of the National Electricity Plan 2023–27, which aim to open the electricity market to competitive access for up to 800 MW, well-informed sources told Business Recorder.

The Sindh government has raised constitutional and practical concerns, asserting that Article 157 of the Constitution empowers provinces to develop, transmit, and distribute electricity within their jurisdictions. Therefore, any federal directive must respect this mandate and not impose structural or pricing mechanisms that hinder provincial rights or market competition.

In comments submitted to the Cabinet Committee on Energy (CCoE), Sindh Secretary for Energy, Mushtaque Ahmed Soomro, highlighted concerns around “stranded costs” during the market transition. He noted that linking these costs to the full generation capacity charges of the Supplier of Last Resort (SoLR) renders open access economically unviable, undermining the very purpose of market liberalization.

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Sindh has proposed the following remedies: (i) adopting a phased or tapered approach to stranded cost recovery;(ii) ensuring efficiency gains are factored into stranded cost calculations; and (iii) conducting third-party validation of the stranded cost methodology with provincial input.

Sindh also criticized the proposed 800 MW cap for open access over five years, arguing that it disproportionately restricts industrial zones—particularly in Karachi, which holds the country’s largest industrial load. The province called for this cap to be determined dynamically by the regulator based on grid capacity and market signals, and for provincial quotas to ensure equitable access.

The provincial government further emphasized that proposed frameworks and auction mechanisms will directly affect industrial policy and economic development. To ensure fair implementation, it recommended: (i) formal provincial representation in auction framework design and oversight; and (ii) regular consultations between ISMO, the Ministry of Energy, and provincial governments for transparent auction design and demand quantum allocation.

Soomro reiterated that any move toward market liberalization must align with Article 157. “The goals of open access and market liberalization may be supported,” he stated, “but not through a policy that discourages competition, restricts industrial growth, or marginalizes provincial participation.”

To that end, Sindh recommended key changes to Strategic Directive-87, proposing the following: (i) open access charges, including grid usage, metering, and cross-subsidy fees, should be recovered from consumers opting for open access for the duration of the NE Plan or as amended by the government; (ii) the federal government must consult provinces in developing policy frameworks for stranded cost recovery, incorporating market realities and introducing incentives for competitive transparency; and (iii) for intra-provincial bilateral trading, the relevant provincial government should define the open access charge frameworks.

Sindh further emphasized that capacity allocation is a regulatory function and should remain with the regulator. Where no framework exists, stranded costs should be shared by all bulk power consumers of a competitive supplier, based on the generation capacity charges applicable to similarly situated consumers of the SoLR.

The Balochistan government also raised objections, particularly over the financial burden imposed on export-oriented industries. It argued that under the Competitive Trading Bilateral Contract Market (CTBCM) framework, open access should be limited to Use of System Charges (UoSC). Including stranded costs or cross-subsidies would distort fair market competition, escalate electricity prices, and deter investments in renewable energy and local projects.

In a formal letter, Balochistan Secretary for Energy Dawood Bazai stated that the province does not support the inclusion of cross-subsidies or systemic inefficiencies in the open access tariff, warning that such an approach would render CTBCM ineffective and unaffordable for the province’s industrial and export sectors.

He further recommended that: (i) open access allocations be determined based on comprehensive market needs assessments in consultation with provincial stakeholders; and (ii) a structured, time-bound plan be developed to phase out cross-subsidies from industrial tariffs to promote sustainable energy access and economic growth.

According to sources, the Khyber Pakhtunkhwa government also conveyed its concerns through official channels. However, it received the CCoE summary only hours before the meeting — chaired by the Prime Minister — that approved wheeling charges of Rs 12.55 per kWh.

Copyright Business Recorder, 2025