The National Electric Power Regulatory Authority (Nepra) has released its comprehensive State of Industry Report for 2023, urging the government to implement decisive reforms in the electricity sector. Nepra stressed the importance of eliminating cross-subsidies and reducing multiple taxes within electricity tariffs to ease the burden on consumers. Additionally, the regulator called for the division of distribution companies and the introduction of competition from the private sector at the feeder level to enhance efficiency.
Nepra criticized the government’s practice of revenue-based load shedding, highlighting its negative impact on honest consumers unfairly penalized for the actions of others. The report advocated for governance and technology-driven solutions to effectively address these issues.
The annual flagship report underscored significant governance, planning, and operational deficiencies across the power sector’s fuel supply, generation, distribution, and transmission systems. Nepra emphasized the necessity of a comprehensive overhaul to tackle these challenges.
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The report expressed concern over the growing circular debt, outstanding payments exceeding Rs900 billion from current defaulters, a struggling 92% bill recovery rate, and persistently high system losses. Various factors contributing to the increased cost of electricity were identified, including fuel costs, currency devaluation, capacity payments, circular debt, reduced electricity usage, transmission losses, theft, and governance issues.
Nepra criticized the government’s policy of a uniform tariff for all companies, citing cross-subsidization that burdens consumers of efficient distribution companies with the financial shortcomings of underperforming counterparts. Urgent rectification of this practice was called for by the regulator.
Furthermore, Nepra urged a redesign of the billing format to clearly distinguish core electricity charges from supplementary elements such as taxes, duties, fees, and surcharges. Horizontal restructuring of power distribution companies was emphasized to enhance competition, efficiency, and innovation within the sector.
The proposed horizontal restructuring aims to create a more equitable playing field, encourage private sector participation, and stimulate investment in the distribution sector. Breaking monopolies into smaller units fosters accountability, promotes customer-centric service delivery, and allows for greater adaptability to local conditions and needs.