Fixed charges: Nepra receives review plea challenging its determination

ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) has received a review petition challenging its recent determination imposing fixed charges of up to Rs675 per kilowatt (kW) of sanctioned load on domestic consumers, irrespective of their actual electricity consumption.

The petition has jointly been filed by former interior minister Lt. Gen. Moin ud Din Haider (retired), S.N. Nasir Raza, Anwar Masroor Khan, Moin M Fudda and Syed Feisal Ali.

According to the petitioners, they and thousands of consumers are directly and adversely affected by the Authority’s decision of February 11, 2026, through which Nepra approved the rationalisation of tariffs for distribution companies (Discos) and K-Electric, including the introduction and/or recalibration of fixed charges for domestic consumers on a sanctioned-load, per-kilowatt basis.

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Under the decision, residential consumers are subjected to enhanced fixed monthly charges irrespective of their actual electricity consumption, resulting in a substantial and unavoidable financial burden on approximately 28.5 million domestic consumers across the country.

The petitioners argue that the decision suffers from errors apparent on the face of the record, misapplication of statutory powers, and non-compliance with mandatory tariff standards and cost-of-service principles under the applicable law.

They maintain that the determination represents not merely an incremental adjustment but a structural redesign of the residential tariff architecture. According to them, the magnitude of its impact requires strict statutory compliance, technical rigour and independent regulatory reasoning, thresholds which, they argue, the decision fails to meet.

Under the revised framework, residential consumers — including categories that were previously treated as protected or exempt from fixed charges — are now subject to mandatory fixed charges ranging between Rs200 and Rs675 per kilowatt of sanctioned load, irrespective of their actual energy consumption during a billing cycle.

The petitioners contend that this represents a significant departure from the earlier tariff structure, under which protected consumers, particularly those within lower consumption slabs, were shielded from fixed liabilities to ensure affordability and social protection.

By linking the fixed charge to sanctioned load rather than units consumed, Nepra has introduced a regime in which liability is attached to capacity entitlement rather than usage.

As a result, a household may consume minimal electricity, remain within lower slabs, or reduce consumption through conservation measures, yet still face significant fixed monthly charges solely due to the sanctioned load associated with its connection.

The petitioners argue that this design disproportionately affects lower and middle-income households, for whom fixed and unavoidable costs constitute a larger share of monthly expenditure. They further contend that the measure effectively dilutes the protective character of lower consumption slabs by imposing a capacity-based charge independent of actual consumption behaviour.

The impugned decision largely relies on the assertion that around 73 percent of the power sector’s total cost base is fixed in nature, and that this structural characteristic justifies greater reliance on fixed charge recovery within the residential tariff framework.

While acknowledging that a significant portion of generation and transmission costs may be classified as fixed or capacity-related in accounting terms, the petitioners argue that the existence of high fixed costs alone does not resolve the question of how these costs should be allocated among consumer classes.

They contend that a system-level statistic cannot substitute for a class-wise cost-of-service analysis demonstrating that residential sanctioned load — rather than other structural or policy-driven cost drivers — is the appropriate basis for recovering the approved amount.

According to the petitioners, the decision does not undertake the technical analysis required to translate the 73 percent fixed-cost figure into a defensible allocation methodology. Without disaggregation, coincident peak responsibility modelling and a demonstrated linkage between residential demand characteristics and capacity procurement, reliance on an aggregate fixed-cost ratio risks oversimplifying a complex allocation problem.

The petition further notes that the projected annual recovery of Rs101 billion is highly sensitive to assumptions regarding slab-wise consumer distribution.

Even modest divergences in underlying data could significantly affect fiscal outcomes. Approval in the absence of transparent reconciliation, they argue, raises concerns that the recovery model may have been aligned with a fiscal target rather than derived from validated and internally consistent data.

The petitioners also point out that, according to the decision and accompanying record, of the projected annual recovery of about Rs132 billion through the recalibrated fixed-charge regime, approximately Rs101 billion has been structured to eliminate the cross-subsidy historically borne by the industrial sector. This would reduce industrial tariffs by about Rs4.04 per unit.

The remaining Rs31 billion is intended to reduce variable tariff components in higher residential consumption slabs, with the stated objective of discouraging affluent consumers from migrating away from the national grid toward off-grid or distributed generation solutions.

Petitioners argued that since promotion of industry is also the responsibility of provinces, to meet the target of Rs. 101 billion provinces should transfer Rs 60 billion collected on account of Electricity Duty.

Whereas remaining shortfall of Rs. 41 billion could be met from GST unreasonably collected on Rs. 278 billion under the head of PHL towards clearing of circular debt.

According to the petitioners, the redesign therefore serves a dual fiscal purpose: financing industrial relief by transferring the subsidy burden to residential consumers, and stabilising grid revenues by reshaping price signals in upper domestic slabs.

They argue that this allocation indicates that the redesign is not based on a fresh class-wise cost-of-service analysis attributable to residential demand characteristics, but rather on a redistributive fiscal exercise aimed at achieving broader sectoral objectives such as industrial competitiveness and revenue stabilisation.

The petitioners maintain that such redistribution required strict statutory justification, transparent quantification of inter-class subsidies and a clear proportionality assessment, none of which, they claim, is adequately demonstrated in the decision.

In light of these concerns, the petitioners requested the Authority to accept the review motion; recall the February 11, 2026 decision insofar as it imposes sanctioned-load-based fixed charges on residential consumers; suspend its implementation pending lawful redetermination; publish the full procedural and data record; require a comprehensive class-wise cost-of-service study; reconcile slab-wise consumer data; examine the legality of GST on DSS and issue corrective directions; evaluate alternative fiscal pathways including Electricity Duty contribution and GST reallocation; and undertake an affordability and inflation impact assessment.

Copyright Business Recorder, 2026