Privately owned substations by DISCOs: KATI urges Nepra to address ‘systematic and unlawful use’

ISLAMABAD The Korangi Association of Trade and Industry (KATI) has urged the National Electric Power Regulatory Authority (NEPRA) to address what it termed as the “systematic and unlawful use” of privately owned substations by power distribution companies (DISCOs), calling for regulatory reforms and compensation for affected industrial consumers.

In a letter addressed to Registrar NEPRA, copies of which have also sent to Minister for Power, Sardar Awais Ahmad Khan Leghari and other concerned authorities, KATI highlighted that many factories established in Karachi’s industrial estates during the 1970s and 1980s had installed private 11 kV substations and Dedicated Distribution Systems (DDS) at their own expense and on privately owned land, strictly for self-consumption under the regulatory framework applicable at the time.

However, over the years, DISCOs/K-Electric began connecting neighbouring consumers through these privately owned substations without obtaining No Objection Certificates (NOCs) from the owners, entering into formal agreements, or providing any compensation for the use of infrastructure or land.

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According to KATI, such neighbouring consumers could have been independently served through overhead lines, pole-mounted transformers (PMTs), or new feeders from the DISCOs own distribution systems.

Instead, DISCOs opted to utilise private infrastructure, saving costs for themselves and new consumers without sharing any financial benefit with the original owners.

The issue becomes more serious when factory owners seek to sell, close, or redevelop their properties. In such cases, DISCOs either refuse to relocate the connections routed through the private substations or demand that the owners bear relocation costs — despite the initial use being unauthorised.

KATI termed this practice as effectively holding property owners “hostage on their own land.”

The association also pointed out a structural flaw in the regulatory framework, particularly Regulation 10 of SRO 448(I)/2022, which allows conversion of a private DDS into a Common Distribution System (CDS) without making it part of the DISCO’s asset base or requiring compensation to the owner.

“This creates a situation where a private investor is forced to permanently surrender land and infrastructure for public use without compensation, while DISCOs continue to earn revenue from the same assets,” the KATI argued.

The association maintained that such provisions are inconsistent with constitutional protections under Articles 23 and 24, which guarantee property rights and prohibit compulsory acquisition without due process and compensation.

To address these concerns, the KATI has proposed a series of measures, including: directing DISCOs to provide a complete inventory of connections routed through private DDS infrastructure; placing the full cost of relocation on DISCOs or benefiting consumers; mandating prior written consent and market-based compensation for any DDS-to-CDS conversion; and introducing a transparent registry of such connections.

The KATI has also called for retrospective compensation to owners for past unauthorized use of their land and infrastructure, along with refunds of any relocation costs previously charged.

“The principle is simple,” KATI stated. “If a DISCO chooses to use private infrastructure to save costs, it must also bear the full consequences of that decision, including relocation expenses when the owner exercises lawful property rights.”

The association urged the NEPRA to take immediate and decisive action to ensure fairness, legal compliance, and protection of private investment in the power distribution sector.

Copyright Business Recorder, 2026