EDITORIAL: Power regulator Nepra’s determination of the National Grid Company’s (NGC) multi-year tariff for FY23 through FY25 is significant not only because of the revenue requirement it approves, but because it once again highlights a persistent weakness in Pakistan’s power sector’s regulatory framework.
The authority has substantially pared down NGC’s claimed revenue requirement while issuing a long list of operational and governance directives. Yet the broader policy lesson lies elsewhere: tariff determinations continue to arrive well after the period to which they relate.
This has become an all too familiar feature of Pakistan’s electricity sector. Multi-year tariff petitions are intended to provide regulatory certainty, allowing utilities to plan investments while giving consumers visibility over future charges. Instead, approvals frequently arrive after much of the control period has already elapsed. The inevitable consequence is the accumulation of prior-year adjustments, forcing consumers to absorb costs retrospectively while utilities operate for prolonged periods under regulatory uncertainty.
Be that as it may, the issue is not unique to the transmission business. Across the electricity value chain, delayed determinations have become the norm rather than the exception. Distribution companies, generation plants and transmission entities alike have often had to wait years before their revenue requirements are finalised. The result is a regulatory cycle that continuously looks backwards.
This matters because tariff regulation is not merely an accounting exercise. Timely determinations influence investment decisions, financing costs and operational planning. Utilities are expected to execute multi-billion rupee investment programmes, expand networks and improve reliability; yet the regulatory signals governing their returns often arrive after the fact. Such uncertainty ultimately raises the cost of doing business, whether through higher financing costs, deferred investments or larger adjustment claims in subsequent years.
Consumers fare no better. While delayed approvals may temporarily postpone tariff increases, they rarely eliminate them. Costs eventually find their way into the tariff through prior-year adjustments, often in larger and less predictable increments than would otherwise have been necessary. What appears politically expedient today merely postpones the burden until tomorrow, frequently accompanied by greater public dissatisfaction.
The irony is that Pakistan’s power sector has made considerable progress in strengthening regulatory oversight. Performance benchmarks have become more rigorous. Investment plans are subject to greater scrutiny. Third-party verifications, enhanced reporting requirements and stricter governance standards are increasingly becoming part of tariff determinations. Nepra’s latest decision reflects this evolution through directives on transmission losses, project implementation, investment monitoring and institutional reforms.
These are welcome developments. Equally encouraging is the regulator’s instruction requiring NGC to immediately file its next multi-year tariff petition. Such continuity is essential if the sector is to transition towards a genuinely forward-looking regulatory regime rather than one perpetually engaged in reconciling the past.
The profound challenge, however, extends beyond requiring utilities to file petitions on time. The entire regulatory process—from petition submission and stakeholder consultation to hearings and final determinations—must operate within predictable timelines. Delays at any stage dilute the very purpose of multi-year regulation.
Pakistan’s power sector reforms have understandably concentrated on reducing losses, improving recoveries and containing circular debt. Those objectives remain indispensable. Yet regulatory timeliness, too, deserves to be recognised as a reform in its own right. Predictable tariffs improve investment planning, reduce financing uncertainty and minimise the need for retrospective recoveries that serve neither consumers nor utilities.
As the sector undergoes institutional restructuring, with the National Grid Company and the Independent System and Market Operator assuming increasingly distinct roles, regulatory processes must evolve alongside them. Strong regulation is not defined solely by prudence or rigorous scrutiny. It is equally defined by predictability and timeliness. A tariff determined years after the fact may satisfy regulatory requirements, but it falls short of delivering the certainty that modern infrastructure sectors require.
Copyright Business Recorder, 2026