LAHORE: National Electric Power Regulatory Authority (NEPRA) should change tariff determination process from price-cap regulation to service quality and incentive based regulation, said a report submitted to the Authority by the relevant quarters.

Sources have further revealed that the government is also considering another proposal of increasing the number of distribution companies in such a way that each distributor is responsible for delivering service to one district. It would help the distribution companies in meeting the everyday rising demands of consumers in terms of service quality, they added.

According to the proposal, copy available with Business Recorder, a change of tariff determination process would improve the performance and efficiency of distribution companies if quality of service and incentive based regulations is made part of the tariff determination criterion.

It has further pointed out that service quality parameters should be part of tariff determination process to bring competition among distribution companies. It would also help distribution companies to achieve economies of scale and economies of scope by maintaining strong interaction with customers and knowing their demands.

At present, the NEPRA determines tariff for generation, transmission and distribution companies. Multiyear performance is considered to be the prime factor for tariff determination of distribution companies while tariff for generation and transmission companies is based on cost-push factor. As a result, the distribution companies are least bothered about the quality of service as far as tariff determination is concerned and instead, they are allowed to set tariff below the cost of providing these services to end-users.

Copyright Business Recorder, 2021