ISLAMABAD: National Electric Power Regulatory Authority (Nepra) has raised serious concerns over the performance, planning, and investment execution of Hyderabad Electric Supply Company (HESCO), highlighting significant inefficiencies in its operations, underutilisation of approved funds, and persistent high transmission and distribution (T&D) losses.
These observations were made in Nepra’s detailed decision on HESCO’s Distribution Investment Plan (DIP) for the period FY2025-26 to FY2029-30, which outlines an ambitious investment proposal of over Rs112 billion aimed at improving the power distribution network, enhancing reliability, and reducing losses.
According to the regulator, HESCO has consistently failed to fully utilise the capital expenditure approved during the previous multi-year tariff (MYT) control period. Against a total approved investment of Rs72.6 billion from FY2020-21 to FY2024-25, the company managed to utilise only Rs13.4 billion, reflecting a substantial gap between planning and execution.
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The authority noted that such underutilisation points to serious shortcomings in project management, procurement processes, and implementation capacity.
HESCO attributed the underperformance to a combination of external and internal challenges, including the impact of the COVID-19 pandemic, rising inflation, import restrictions imposed through SRO 598(I)/2022, and delays in land acquisition.
The company also cited government austerity measures, which restricted development spending, and the suspension of Letters of Credit (LCs), which hindered the import of essential equipment.
Additionally, several grid station projects faced delays due to legal disputes, regulatory approvals, and environmental clearances, further compounding the execution challenges.
Despite these explanations, Nepra emphasised that such recurring issues indicate systemic weaknesses that must be addressed urgently.
One of the most alarming concerns highlighted by the authority is HESCO’s persistently high T&D losses, which remain significantly above the targets set by Nepra.
While the regulator had set a progressively declining loss target from 19.43 percent in FY2020-21 to 17.55 percent in FY2024-25, HESCO’s actual losses hovered around 27 percent throughout the period, reaching 27.77 percent in FY2024-25.
The company attributed the high losses to staff shortages, which limited its ability to monitor field operations, ensure accurate metering, and implement effective loss reduction measures.
However, Nepra noted that the failure to meet targets over multiple years reflects deeper operational inefficiencies and lack of effective control mechanisms.
In terms of financial performance, HESCO’s billing and recovery indicators also presented a mixed picture. Although billing increased significantly from Rs70.8 billion in FY2020-21 to Rs157.4 billion in FY2024-25, recovery rates fluctuated and declined to around 74 percent in the latest year, indicating continued challenges in revenue collection.
Operational reliability indicators, including System Average Interruption Frequency Index (SAIFI) and System Average Interruption Duration Index (SAIDI), showed only marginal improvements.
Despite a slight decline in outages, the duration of power interruptions remained high, underscoring the need for substantial infrastructure upgrades and improved maintenance practices.
Safety performance also emerged as a major area of concern. The number of fatal accidents, including both employees and the public, showed an inconsistent trend, with total fatalities rising again to 16 in FY2024-25 after some improvement in earlier years.
Nepra stressed that even a single fatality is unacceptable and called for immediate and comprehensive safety reforms.
Despite these challenges, HESCO reported several initiatives aimed at improving operational efficiency and customer service. These include the implementation of Automated Meter Reading (AMR) and Advanced Metering Infrastructure (AMI) systems, establishment of a centralised complaint management system, digitisation of customer service centers, and launch of a mobile application for billing and complaint tracking.
The company also introduced reforms such as the creation of a Market Implementation and Regulatory Affairs Department (MIRAD), adoption of e-procurement systems (E-PADS), and induction of C-level management positions to strengthen governance and accountability.
However, Nepra maintained that these initiatives have yet to translate into tangible improvements in key performance indicators and urged the company to focus on effective implementation rather than policy announcements.
For the upcoming control period, HESCO has proposed an investment plan of Rs112.35 billion, with a significant portion allocated to system expansion and grid development (STG), estimated at over Rs57 billion.
The plan includes construction of new grid stations, conversion of existing stations from 66kV to 132kV, augmentation and extension of transformers, and rehabilitation of aging infrastructure.
The company plans to finance the investment through a combination of internal resources, including return on rate base (RoRB) and depreciation, as well as external borrowing from sources such as the World Bank.
However, Nepra clarified that upfront funding for such investments is not allowed under the regulatory framework, and cost recovery will be permitted only after actual investments are made and verified.
The authority has directed HESCO to ensure timely arrangement of financing and warned that any delays due to funding constraints will not be passed on to consumers. It also instructed the company to maintain a dedicated account for investment-related funds and strictly utilise them for approved projects.
Copyright Business Recorder, 2026