ISLAMABAD: National Electric Power Regulatory Authority (Nepra) has apparently been divided over an upward revision and continuation of the Incremental Consumption Package (ICP) at Rs25.30 per unit against the original rate of Rs22.98 per unit, with two members recommending suspension of the package over the failure of the Power Division and its subordinate organisations to provide authentic data.
Member (Tariff and Finance) Amina Ahmed and Member (Development) Engineer Maqsood Anwar Khan opposed continuation of the package, maintaining that its revised rate lacked a credible linkage with the actual marginal cost of serving incremental electricity consumption and could impose additional financial burdens on ordinary consumers.
READ ALSO: NEPRA raises incremental power tariff to Rs25.30 per unit for industrial, agricultural consumers
However, Nepra Chairman Waseem Mukhtar, exercising his casting vote, supported continuation of the package, while acknowledging that the required data had not been provided to the regulator. Member (Law) Ghulamullah Shaikh also supported the continuation of the package.
In their dissenting opinion on Nepra’s November 6, 2026 decision regarding the semi-annual review of the package, the two members recommended its temporary suspension until the Power Division submitted a comprehensive review supported by verifiable calculations of actual marginal costs. The fundamental principle underpinning the package was that participating consumers would pay a rate equal to or higher than the actual marginal cost of serving their incremental consumption, ensuring that consumers outside the package would not bear any financial burden or cross-subsidy.
The package also contained a mandatory semi-annual review mechanism to ensure continued cost-revenue alignment, with the incremental tariff adjusted whenever necessary.
During a public hearing, Nepra had warned that it would not approve the revised package until Power Division and PPMC consult industrial consumers who are raising their voice. However, industrial consumers, Rehan Javed, Aamir Sheikh and Arif Bilwani said that they were not consulted at all.
“The incremental package SRO is available for everyone to read. All the conditions and rules in that have been violated and broken. So the only confusion is why nobody wants to do anything about it. It’s especially confusing since government is not benefiting from it so why so much resistance to address the issue properly?” said Aamir Sheikh.
He further stated that all this highlights is that in the end the only real equitable solution is to bring down the tariff instead of making complicated discriminatory packages.
Rehan Javed stated that the cat is out of the bag now; this shows lack of seriousness and ability to solve a simple problem.
He said that the marginal price “was not provided” by either ISMO or PPMC which were duty bound to do so, adding that PPMC’s method does not determine the actual marginal cost.
Ahmad Ali Shah said that these repeated sermons on sustainability, affordability and transparency will remain nothing more than sophisticated vocabulary for disguising an unfolding disaster while the consumer is forced to finance the consequences of professional incompetence and policy failures.
The dissenting members noted that paragraph 70(v) of Nepra’s approval decision required semi-annual reviews to ensure continued cost-revenue alignment and adjustment of the marginal tariff as necessary.
They maintained that this provision was intended to protect non-beneficiary consumers from future financial burdens while ensuring that incremental consumers were protected against retrospective tariff revisions.
However, they alleged that the Power Division failed to fulfil its obligation to submit a timely and comprehensive review after the first six-month period ending May 31, 2026.
Nepra wrote to the Ministry on June 16, 2026, directing it to submit the review after no formal request or comprehensive assessment had been received.
The Power Division submitted raw data on July 29, 2026, but the information contained no recommendation, request or calculations concerning the actual marginal cost of incremental consumption during the review period. Nepra returned the submission as incomplete and directed the Ministry to provide a comprehensive review.
On September 9, 2026, the Power Division requested Nepra to conduct the review itself and hold the hearing, effectively asking the regulator to undertake an assessment that the package sponsor was responsible for submitting. The dissenting members said Nepra was left with no option but to undertake its own assessment despite the absence of the required marginal-cost analysis from the Ministry.
The regulator’s tariff team calculated the weighted average marginal cost of serving incremental demand during the review period, adjusted for allowed losses, at approximately Rs31.83 per unit.
During the hearing and subsequent discussions, Nepra identified five factors that could have overstated the calculated marginal cost, including generation dispatched due to transmission or operational constraints, RLNG generation under must-purchase obligations, subsequent RLNG price revisions approved by the Economic Coordination Committee, and the need for PLEXOS modelling with and without incremental package demand.
The regulator also identified discrepancies between hourly operational and fuel-cost information submitted by the Independent System and Market Operator (ISMO) and monthly fuel-cost data reflected in Fuel Cost Adjustment (FCA) decisions.
The Power Division and ISMO reportedly agreed with these data constraints and were asked to provide information necessary to determine the actual marginal cost attributable exclusively to incremental consumption. However, according to the dissenting members, ISMO provided only operational and must-purchase tags under the Market Commercial Code, partially addressing two of the identified constraints. This reduced the estimated marginal cost from Rs31.83 to Rs29.65 per unit.
The remaining information, including complete data regarding RLNG generation dispatched under must-purchase obligations and material required to address the other constraints, was not provided despite repeated follow-ups. The dissenting members maintained that Rs29.65 per unit could not be considered an accurate determination of actual historical marginal cost because the outstanding factors had not been adjusted through verifiable data.
They also argued that adopting this rate would defeat the purpose of the package, as it was higher than the off-peak tariff under the normal electricity tariff structure and could penalise incremental consumers instead of encouraging additional consumption.
The members separately questioned the Power Division’s proposed incremental rate of Rs25.30 per unit, which was allowed by the Nepra Chairman and Member (Law).
According to the dissenting opinion, the proposed rate was based on the generation mix apparently assumed at the time of designing the package, with updated fuel prices.
They argued that the mandatory semi-annual review was intended to determine actual costs under prevailing system conditions rather than merely update fuel prices against an assumed generation mix.
Describing the methodology as disconnected from the purpose of the review, the dissenting members said the proposed Rs25.30 per unit had no credible relationship, with actual marginal cost.
They further warned that the delay in undertaking the review had adversely affected electricity consumers who were not availing the package. The dissenting opinion noted that incremental consumption could increase the system’s average fuel cost, with the resulting impact recovered from all consumers through the FCA mechanism.
Additionally, incremental units were excluded from quarterly tariff adjustments, increasing the quarterly adjustment burden on consumers outside the package.
The members argued that the issue was not whether the incremental tariff should be Rs25.30 or Rs29.65 per unit, but whether a package designed around cost-reflectivity could continue without a validated cost-reflective rate.
They endorsed the case officer’s recommendation for temporary suspension until the Power Division submitted a complete review containing verifiable calculations of actual marginal costs and a proposed incremental rate.
The dissenting members said suspension, with adequate notice, was necessary to ensure compliance with Nepra’s requirements, maintain cost-revenue alignment and protect ordinary consumers from bearing the cost of the Ministry’s failure to submit the review on time. The Nepra decision has also triggered renewed concerns among industrial stakeholders over the transparency of the package’s pricing mechanism and the possibility of cross-subsidisation through electricity tariff adjustments. The Incremental Consumption Package was prepared by the Power Division and approved by the Federal Cabinet on November 5, 2025, with the objective of increasing electricity demand, bringing industrial consumption back to the national grid and utilising idle generation capacity for which consumers were already paying.
Copyright Business Recorder, 2026
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