Speakers raise questions over new electricity charges system

ISLAMABAD: Speakers at a seminar on Tuesday raised questions over the newly introduced electricity charges system and called for greater clarity, predictability and non-discriminatory treatment of consumers under Pakistan’s newly finalized Use of System Charges (UoSC) framework. The seminar titled “Powering Change: UoSC Finalisation and the Dawn of CTBCM in Pakistan, ” jointly organised by the Sustainable Development Policy Institute (SDPI) and the Pakistan Renewable Energy Coalition (PREC), energy experts, industry representatives and regulatory specialists further called for ensuring a transparent system. At the event, they thoroughly examined the regulatory and commercial implications of the use of system charges recently determined by the National Electric Power Regulatory Authority (NEPRA), which underpin Pakistan’s Competitive Trading Bilateral Contract Market (CTBCM), a reform intended to allow eligible consumers to purchase electricity directly from competitive suppliers rather than exclusively through their local distribution company. Ayub said the CTBCM was designed to introduce competition among power sector participants and was never intended to directly benefit ordinary consumers. Speaking on the occasion, Muhammad Ayub, former Managing Director of the National Transmission and Despatch Company (NTDC) and former Chief Executive Officer of KP Transmission Company, said UoSC components tied to network infrastructure should be based on multi-year loss calibration studies, given that line losses and equipment performance change over the operational life of transmission assets. He said NEPRA should require at least a 10-year loss-calibration assessment for new transmission lines before finalising related charges. He also raised concerns about how supply disruptions and network faults would be reflected in billing mechanisms, and about the capacity distribution companies would need to reserve to guarantee reliable supply to bilateral consumers. He cautioned that the recent formation of separate provincial electricity regulatory authorities in Sindh, Khyber Pakhtunkhwa and Punjab could complicate the implementation of a nationally coordinated competitive trading market, given the need to reconcile decisions across multiple regulatory bodies at the national level. He cautioned that if the current trajectory of rising UoSC components, losses and associated charges continued, the resulting tariff would eventually become unaffordable for industrial consumers under any market structure, including CTBCM. He said the priority should have been to address recovery and losses first, including through privatisation or restructuring of specific loss-making distribution circles rather than adding new charges to offset those losses. Engineer Ubaid-ur-Rehman Zia, Head of the Energy Unit at SDPI, said the discussion would reflect on one of NEPRA’s most consequential recent decisions and would examine the gaps and shortcomings that have emerged following the market liberalisation reforms, particularly with respect to the tariff structure applied to consumers using transmission and distribution network services. He said there had been extensive debate around determining an ideal set of charges for transmission and distribution companies, and that the seminar would bring together stakeholders to explore these gaps in detail. Muhammad Usman Bin Ahmad, Energy Transition Officer at Alternate Development Services (ADS), presented a detailed technical breakdown of the UoSC components, including transmission and distribution charges, transmission and distribution loss reflections, cost adjudication, the standard cost component, and the debt service surcharge, along with their cumulative impact on industrial consumers. Ramsha Panwhar of PREC said the UoSC determination process remained a work in progress, that the charges could not yet be considered final, and called for greater transparency in the breakdown of individual components, along with a revision of the standard cost component following the first round of competitive auctions. She said a consistent long-term plan for the framework needed to be clearly communicated to stakeholders. Manzoor Ahmed Alizai raised concerns regarding the potential impact of the UoSC framework on ordinary consumers, and said there remained a lack of clarity on the governance mechanism for determining and subsequently revising the charges. Representing the Federation of Pakistan Chambers of Commerce and Industry’s Energy Advisory Committee and the Karachi Atlas Industries Trade Association, Rehan Javed said no comparable market internationally allows a distribution company’s tariff for willing or higher-usage consumers to exceed the industrial tariff, and questioned the repeated revisions to the proposed charge figures across successive regulatory motions. He said stakeholders needed clarity on the exact tax and charge components being levied, and stressed that policy inconsistency was discouraging new investment in the sector. Hasnat Khan of the Pakistan Solar Association said the notification establishing the UoSC framework did not adequately define the methodology or basis for the cross-subsidy component, and argued that such costs should be attributed to the entities generating and supplying the power rather than distributed without a clear rationale. He also suggested that hybrid battery storage and renewable energy models could offer industrial consumers a more commercially viable alternative to new standalone generation capacity. Muhammad Umer of SDPI raised questions about the potential impact of the new charges on protected consumer categories, saying the effects of UoSC and CTBCM could not be assumed to be uniform across all consumer segments given the structural differences across Pakistan’s distribution companies. He suggested that any transition be guided by a long-term, roughly 10-year phased roadmap linked to measurable improvements in distribution company performance, with incentive and disincentive mechanisms tied to individual DISCO performance, rather than charges being adjusted incrementally. Copyright Business Recorder, 2026

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