ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet is said to have not given any weight to the viewpoint of National Electric Power Regulatory Authority (Nepra) about uniform application of Fuel Charges Adjustment (FCA) across the country, sources in Power Division told Business Recorder.
Offering comments on Power Division’s summary titled “application fuel charges adjustment across the country” approved by the ECC on August 19, 2025, depriving KE consumers from previous financial benefit of billions of rupees on account of May and June 2025, Nepra argued that neither the Nepra Act nor the National Electricity Policy 2021 explicitly mandates a uniform Fuel Charges Adjustment (FCA) mechanism. FCA, by its nature, is a cost-reflective adjustment tied to the actual fuel cost variation incurred by a licensee for energy procurement.
According to Nepra, presently the national power sector operates under a dual cost basket structure. Discos procure power from the centralized CPPA-G pool under the Single Buyer regime.
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K-Electric, a vertically integrated utility with its own generation, transmission and distribution setup, is partially interconnected with the national grid. This structural separation necessitates separate FCA determinations, as the underlying fuel mix, procurement sources, and operation costs differ materially between the two baskets.
The power sector regulator argued that despite all this, it previously adopted a uniform approach to Quarterly Tariff Adjustments (QTAs) for KE and Discos, driven by policy consideration and federal government directives.
“Without prejudice to Nepra’s core mandate of cost-reflective tariff setting, the Authority is guided by Section 31 (7) of the Nepra Act, which permits reliance on federal government policy and guidelines and as per Section 14 (5), the Authority shall perform its functions in accordance with the National Electricity Policy,” said Registrar Nepra.
However, the Regulator is of the considered view that for legal and procedural propriety, the following points must be observed: (i) FCA for KE and Discos continue to be independently determined based on their respective fuel cost data and generation mix, to preserve regulatory transparency and compliance with cost-reflectivity principles; and (ii) the uniformity at the consumer-end, as proposed by the Ministry, may be achieved through policy-driven alignment of the notified FCAs through (a) FCA determinations for KE and Ex-Wapda Power Distribution Companies (XWDISCOS) remain separate; and (b) any uniform application is driven by policy and supported through subsidies/ cross-subsidies in accordance with National Electricity Policy.
“Without prejudice, it is not clear from the summary, whether subsidy or cross subsidy against determined tariff for KE consumers will be assessed on annual basis, or monthly or quarterly basis,” Registrar Nepra maintained.
Power Division, in its summary stated that National Electricity Policy, 2021 approved by the Council of Common Interest, provides under Clause 5.6 that, in due course, financial self-sustainability will eliminate the need for government subsidies (except for any subsidies for lifeline, industry, or agriculture consumers, as per prevailing Government considerations). It further states that in view of various parameters, including (i) the socioeconomic objectives, (ii) budgetary targets in field, and (iii) recommendations of the Regulator with respect to consumer-end tariff for each state-owned distribution company, the government may continue to propose uniform tariff across the consumers and regions. In pursuance thereto, the Regulator shall, in consumer interest, determine a uniform tariff (inclusive of quarterly adjustments) for all the state-owned distribution companies.
Additionally, the government may maintain a uniform consumer-end tariff for K-Electric and state-owned distribution companies (even after privatisation) through incorporation of direct/ indirect subsidies. Power Division further stated that the government has maintained uniform consumer-end rates to the extent of base tariff and Quarterly Tariff Adjustments across the country.
However, the mechanism of charging Fuel Charges Adjustment (FCA) is currently not uniform for Discos and K- Electric. Accordingly, pursuant to the provisions of Section 31(7) of the Regulation of Generation, Transmission and Distribution of Electric Power Act 1997 (the Act) read with the mechanism/ formula determined by the Authority in the tariff determinations for Discos and K-Electric, different FCAs have been charged to the consumers of XWDISCOS and K-Electric in the past.
Copyright Business Recorder, 2025
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