Net-metering consumers: Discos asked to approach FBR for tax applicability issues

ISLAMABAD: National Electric Power Regulatory Authority (Nepra) has directed Power Distribution Companies (Discos) to approach Federal Board of Revenue (FBR) for clarification on applicability of taxes on net-metering consumers (Distributed Generators).

Nepra shared its viewpoint on mechanism for net-metering consumers on a letter from Peshawar Electric Supply Company (PESCO), which is facing substantial hit on its revenue due to massive net metering.

PESCO, in its letter requested certain clarifications regarding revenue shortfall due to netting-off of units supplied by Distributed Generators (DGs)- the net meters owners, vis-à-vis units purchased from the Distribution Company, treatment of capacity charges with respect to sanctioned load and applicability of GST and other taxes.

Net metering: Nepra to protect interests of ‘all’ consumers

Nepra has explained that Regulation 14, sub-regulation (2) of the Nepra (Alternative & Renewable Energy) Distributed Generation and Net Metering Regulations, 2015 notified under S.RO. 892(l) 2015 with its subsequent amendments, states that the kWh supplied by a Distributed Generator during peak hours shall be net off against the kWh supplied by a Distribution Company during peak hours and the kWh supplied by a Distributed Generator during off peak hours shall be net off against the kWh supplied by a Distribution Company during off peak hours.

The Regulation 14, sub regulation (5) clearly states that “the price payable by a Distribution Company for net kWh shall be the national average power purchase price of the Distribution Company as determined by the Authority and notified by the Federal Government”.

Thus, as per the regulations, units supplied by DGs during peak hours will be offset against peak hours and units supplied during off peak hours will be offset against off peak hours. Additionally, the price payable for the net unit shall be based on the national average power purchase price. Therefore, adjustments of all net metering units shall strictly be carried out in line with the notified regulations.

Nepra has further clarified that tariff of PESCO is revenue capped and any shortfall over recovery of the allowed revenue requirement based on the Authority’s approved benchmarks, is adjusted in the subsequent tariff as Prior Year Adjustment (PYA).

Nepra argues that the matter regarding application of General Sales Tax and other taxes like income tax, further tax, retailer tax, etc., do not pertain to it. This may be taken up with the relevant forums, i.e., FBR. Regarding applicability of fixed charges, clause 14(3) of the Regulations state that in case the kWh supplied by Disco exceed the kWh supplied by Distributed Generator, the latter shall be billed for the net kWh in accordance with the applicable tariff.

Generally, during peak hours, the kWh supplied by DGs remains lower than consumption from national grid. Therefore, in line with Regulation 14(3), the DGs shall be billed for net units, per the applicable tariff including fixed charges, if applicable on such consumer categories.

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