SPA fee hike, dual taxation & recruitment costs: CPPA-G faces public ire at Nepra hearing
ISLAMABAD: The Central Power Purchasing Agency-Guaranteed (CPPA-G) came under fire at a public hearing on Tuesday over its proposed 37.5 per cent increase in the Special Purpose Agent (SPA) fee for FY2026-27, duplication of functions with other power sector entities, alleged double taxation, recruitment costs and plans to install solar panels at its rented offices despite raising concerns over declining grid demand.
The CPPA-G has sought an increase in its SPA fee to Rs14.47 per kW per month for FY2026-27 from Rs10.52 per kW per month, drawing criticism from interveners who argued that consumers should not be burdened with rising administrative costs amid already high electricity tariffs.
The hearing was presided over by National Electric Power Regulatory Authority (NEPRA) Chairman Waseem Mukhtar. Member (Tariff and Finance) Amina Ahmed, Member (Development) Maqsood Anwar Khan and Member (Sindh) Ghulamullah Shaikh also attended. The CPPA-G team was led by Chief Executive Officer Rehan Akhtar.
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The agency sought an increase of Rs253 million in its Special Purpose Agent revenue requirement, from Rs3.301 billion for FY2025-26 to Rs3.554 billion for FY2026-27.
According to the petition, CPPA-G’s net revenue is projected to increase by only Rs21 million to Rs3.369 billion in FY2026-27 from Rs3.347 billion in the preceding year, based on an assumed average maximum demand indicator (MDI) of 19,400 MW.
The projection also factors in a prior-year adjustment of negative Rs650 million, an increase of Rs350 million in other income and recovery of Rs67 million in loans extended to employees.
The agency briefed NEPRA on the proposed increase, although its audited accounts for the relevant period had not been approved because of certain concerns raised by auditors.
The proposed increase prompted questions about the basis for allowing higher costs when some of the agency’s financial figures remain provisional and unaudited.
During the hearing, interveners also questioned whether the transfer of market operator functions and 20 employees from CPPA-G to the Independent System and Market Operator (ISMO), effective April 30, 2025, had resulted in a corresponding reduction in CPPA-G’s cost base.
Rehan Javed, representing the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), argued that costs associated with functions transferred to ISMO should not continue to be recovered through CPPA-G’s revenue requirement.
He pointed out that CPPA-G’s core costs had increased to Rs3.241 billion against Rs2.591 billion allowed previously, representing an increase of 25.1 per cent, while the proposed SPA fee had risen by approximately 37.5 per cent.
He argued that the petition did not adequately explain the relationship between the transfer of responsibilities to ISMO and the increase in CPPA-G’s costs.
“Revenue must follow the function. Costs that left with the Market Operator must leave CPPA-G’s revenue. Consumers must not pay for one function through two fees,” he argued.
He also questioned whether ISMO’s fee was being recovered separately from consumers and called on NEPRA to establish the extent of any overlapping charges before approving the proposed increase.
Javed further raised questions about a CPPA-G Board resolution dated July 14, 2026, asking whether the board was fully constituted and whether the proposed costs had been duly approved.
He also questioned the reliance on provisional and unaudited FY2025-26 figures for determining the next year’s revenue requirement.
The FPCCI representative sought a detailed working of the fee calculation, particularly the proposed average MDI of 19,400 MW against 26,500 MW used in the previous year. He also called for clarification on the savings attributed to a task force and their actual impact on consumers in rupees per unit.
He maintained that any increase in the fee should be linked to independently verified savings, clearly defined performance targets and demonstrable improvements in the agency’s functions.
Javed also referred to government financing and subsidy measures of Rs930 billion and Rs795 billion, respectively, and questioned whether these government-level transactions had added to CPPA-G’s administrative costs. He argued that the agency’s fee should be assessed against its actual responsibilities rather than the size of electricity-sector financial transactions.
Another intervener, Tanveer Barry, said the proposed increase would further burden electricity consumers and urged NEPRA not to approve overheads that had not been adequately verified.
He questioned CPPA-G’s request for Rs175 million in new hiring costs for FY2026-27, noting that NEPRA had already approved Rs109.71 million for hiring costs for FY2025-26 in June 2026.
Barry argued that the regulator should examine CPPA-G’s past performance, achievement of targets and justification for additional recruitment before allowing further expenditure.
He also pointed to overlapping functions among CPPA-G, the Power Planning and Monitoring Company (PPMC) and ISMO, arguing that consumers were effectively paying multiple entities for related responsibilities.
He alleged that CPPA-G had, on several occasions, submitted inaccurate generation projections, omitted mandatory requirements, including ECC-mandated RLNG allocations, or failed to provide adequate cost-benefit analyses on matters such as wind curtailment and plant-wise outage schedules.
Barry said that electricity prices were already high and that expensive RLNG amid the regional conflict was adding to fuel costs. Any further increase in administrative charges, he maintained, would place additional pressure on consumers and industry.
CPPA-G’s proposal to install solar panels at its rented offices also came under scrutiny, particularly because the agency has repeatedly expressed concern about declining grid demand due to the rapid expansion of solar power installations across the country.
NEPRA members questioned why the agency was considering solarisation for its own premises while raising concerns about consumers shifting away from the national grid.
“Is this grid defection? When our own people will do this, then what can be said about others?” Member (Tariff and Finance) Amina Ahmed asked, during the discussion at the hearing.
The CPPA-G chief executive acknowledged that the proposed installation could be considered grid defection but said the agency was concerned about the broader implications of consumers moving away from the grid.
Member (Sindh) Ghulamullah Shaikh asked whether the premises belonged to CPPA-G or were rented.
Rehan Akhtar explained that the building was rented and said this had been the main reason for the prolonged delay in implementing the solar project.
He added that the agency had not been allotted a plot by the Capital Development Authority (CDA). Even if a plot were provided, construction of its own building could take around five years, whereas the payback period for the proposed solar project was estimated at two years.
The exchange prompted further questions about the agency’s ability to discourage grid defection while considering measures to reduce its own dependence on grid electricity.
The Authority also raised questions about CPPA-G’s ability to provide the requisite records and information despite seeking substantial expenditure for its information technology department.
The issue added to concerns about whether the agency’s proposed administrative costs were adequately supported by measurable improvements in operational efficiency, transparency and service delivery.
During the hearing, CPPA-G’s financing arrangements for addressing the power sector’s circular debt were also discussed.
Rehan Javed stated that CPPA-G had arranged Rs1.225 trillion from banks for circular debt management, of which Rs930 billion in expensive loans had been replaced with cheaper financing. He added that the remaining amount had not been obtained from banks because of certain issues.
The discussion also highlighted the need to distinguish between government-level financing and subsidy decisions and the agency’s own operating expenses when determining its fee.
Arif Bilvani criticised the growing number of power sector entities and questioned the need for multiple organisations performing overlapping functions while recovering their costs through electricity tariffs.
“How many entities are required to control the unbridled power sector whose fee is being recovered from the consumers?” he asked.
Amir Sheikh, another intervener, also criticised the duplication of taxes and the existence of multiple entities with similar responsibilities. He called for measures to reduce electricity costs and improve the competitiveness of industry.
He said CPPA-G has asked for Rs 873 million to be passed on to consumers to pay its turnover tax liability. Basically turnover tax means that 1.25 percent of a company’s total revenue is its minimum tax liability. For example, if revenue is Rs 100m, then the turnover tax will be Rs1250000. This is not fair to consumers as consumers have to pay this 1.25% on the revenue of all the companies in the power hierarchy.
The turnover tax will also have a compounding effect because it will become part of the revenue NEPRA approves for CPPA-G and subsequently be added to the DISCOs’ revenue requirement. DISCOs’ revenue will therefore include the Rs 873 million and DISCOs will then be charged turnover tax again on the Rs873 million at 1.25% because they must pay 1.25 percent on their total revenue.
Copyright Business Recorder, 2026