The infringement of vested rights of rooftop solar generators

In its move to amend the Net Metering Regulations 2015, on 24th August Nepra (National Electric Power Regulatory Authority) issued a notice in the form of a draft SRO to change the word National Average Power Purchase Price (NAPP) to National Energy Purchase Price (NEAP) without explaining the rationale behind this move. Those familiar with the issue started talking about its impact on bills of Roof-Top Solar Generators since the current NAPP of Rs 19.32 per unit at which excess surplus is bought will be reduced to Rs 9 per unit only.

When the news reached the media, it gave the impression that a reduction had already taken place which led to a Press Release issued on 16th September, clarifying that no change had taken place and that its impact will be on 20,700 consumers across Pakistan who have been allowed Net Metering as per the regulations approved by NEPRA. It further explained that the proposed amendment would not have any impact on self-consumption as well as netting off the units and that it only applies to the excess units sold by Net Metering consumers. Additionally, the impact of cost paid of excess units would be shared by remaining consumers of the grid.

In the meantime, on 18th September, a press conference was held in Gujranwala (home to over 2,000 Net Metering consumers) during which Energy Minister Khurram Dastgir commenting on reports of changes in the net metering system, said that there is no such thing on the cards right now and no changes are being made for domestic solar energy users.

However, that message did not reach Nepra, as prior to the September 24th closing date to receive comments, it issued a notice on 21st September announcing a public hearing on 27th September at 11:45 am. No data was provided prior to the hearing on the Authority’s website, and it was expected that data will be shared during the hearing.

However, participants got the clear impression that Nepra officials had neither studied the comments submitted by Net Metering Consumers across Pakistan, nor provided any data of surplus units bought by the 11 Discos during fiscal year 2021-22.

Among two slides shared, one proposed reduction in surplus unit price from Rs 19 to 9 and the other was a payback period of 3.8 years of a 10-kw system which currently stands at 4.8 years. The Nepra Chair spoke for 20 minutes to 50 participants present in person and Zoom audience of over 200 and key among his comments was that the purpose of Net Metering facility is self-consumption and not to make profit by selling surplus units at the same price of Rs 19 per unit. Therefore, the difference of Rs 10 collected will be distributed among the 36 million consumers who do not have net metering.

Thereafter, during interaction of 70 minutes with 10 participants physically present, the most significant issue highlighted was that the Government has signed 25 years’ contracts with the Solar IPPs having upto 100 MW installations which also require financial guarantees and indexation of purchase price with US$ and as a result based on 2021 rate revisions, they were being offered purchase price between Rs 34 and Rs 25.

Moreover, since these projects were installed far away from the grids, there were huge line losses. In response to a question regarding the substantial difference between peak and off-peak rates, the Chairman in clear terms underscored the need for installing batteries.

A couple of Advocates argued that if the contracts with the Solar IPPs cannot be renegotiated then why are Solar Installers with 7 years’ licences being subjected to this amendment, which will be an infringement of their vested rights. The Nepra Chair appreciated this legal point and assured that the Authority will examine it.

The Chairman then commenced taking questions and a participant from Karachi said that while 10 Discos are on one path for implementation of the Net Metering Regulations by charging the GST on Net Units, he pointed out that K-Electric is charging GST on Gross Units. Since there were similar complaints, the Chairman hinted that with respect to the issues highlighted against K-Electric, he might have to conduct a separate hearing in Karachi.

The Chairman then suddenly announced that we will only take a couple of more questions since this session needs to be concluded as another meeting is scheduled at 1:45 p.m. Fortunately, among the many hands raised, I was given the floor wherein appreciating the Chairman’s love for Green Energy and the Green Flag, I said that batteries are already polluting the environment and therefore his recommendation to install batteries is against the very principle of Green Energy.

Solar Generators are supplying at Rs. 19.32 per unit to nearby transformers which with zero-line loss is being sold to a neighbor at Rs. 28 per unit during off peak hours and back to the generators at Rs 34 per unit during peak hours. True Net-Metering in other countries means that after the export in off-peak hours, the meter runs backward till the credit is exhausted.

However, in our case, to discourage use of UPS and batteries and to curtail the outflow of foreign exchange thereof, a wheeling charge of up to 10% be added to the price of off-peak units which can then be offset against the peak hours’ units.

Agreeing with the Chair that Net Metering should not be used as a tool to make profit, I proposed that instead of Net Metering Benefit in cash, an option to carry forward the units be allowed which will provide an ability to use the surplus units in the summer which were exported in the winter.

I also suggested that besides continuing contribution by the Roof-Top Solar Generators in reducing the CO2 carbon emissions, they be encouraged to donate surplus units to nearby mosques or to a not-for-profit community clinic. This proposal was moved by the writer at a PIDE online seminar on 24th September which was attended by 80 high profile professionals.

Vice Chancellor PIDE, Dr Nadeem ul Haq, moderating the webinar, gladly endorsed the suggestion. It is hoped that the Chairman Nepra too will consider the proposal, and this could be a feather in his cap as Pakistan would be the first country to adopt it.

Finally, reacting to 468MW generated by 20,000 + Roof Installers, assuming 500MW for simplicity’s sake, then according to an expert within Nepra, PVs generation capacity is 16% which works out to 80MW whereas Roof -Top Solar Net exported surplus may not be more than 25% which is 20 MW only.

Nepra’s response to this was that according to K-Electric Net Surplus is only 4%. Though hearing concluded in haste leaving many participants disappointed, to get my answer for the exact quantum of surplus units exported by Roof-Top Solar Generators, I learnt in a subsequent hearing (convened to hear the CPPA-G Petition) that Rs. 92 million was mentioned for total net export of units. Therefore, as provided in an XL sheet from CPPA-G to Nepra, in the month of August 2022, total surplus units exported by 28,000 Net Metering Generators to XW-DISCOS stood at 4.8 million units which at Rs 19.32 per unit works out Rs 93 million. If Nepra was to reduce the price to Rs 9 per unit, then Rs 10.32 difference will result in saving of Rs 50 million a month which, according to Chairman Nepra, if distributed among 36 million consumers, will be Rs 1.39 on a monthly basis or Rs 17 maximum per year which is next to nothing.

Surely, besides tariff experts, if an accountant was associated with this exercise, based on simple mathematics he would have advised against this amendment.

Even over the next 5 years when the Authority expects that Roof-Top Solars will add 500 MW each year, this figure will be below Rs 100 since the country is already in the grip of high tariff and per capita income in real terms will continue to decline. Thus, as opposed to offering Rs 17 per year, as a custodian and protector of 36 million consumers, perhaps it is about time that Nepra rose to the stature of asking the Federal Government to stop collecting TV license fees of Rs 35 per month instead. This burden lies on former Information Minister Sheikh Rashid who convinced the then Finance Minister Shaukat Aziz to introduce a monthly fee of Rs. 25 which was subsequently increased to Rs. 35. Removing this fee will straight away provide relief of Rs. 420 a year also to lifeline consumers who are already paying a sum to cable operators. Hopefully, this way Nepra will also help PTV stand on its own feet.

The views expressed in this article are not necessarily those of the newspaper

Copyright Business Recorder, 2022