ISLAMABAD: The National Electric Power Regulatory Authority (NEPRA) has provisionally raised the incremental electricity consumption rate for industrial and agricultural consumers from Rs22.98 to Rs25.30 per unit. The regulator warned that the government's failure to provide a full cost assessment could leave other consumers carrying extra costs.
The decision, issued Nov. 6, applies to consumers of ex-WAPDA distribution companies and K-Electric starting with November 2026 billing. It follows a review of the Incremental Consumption Package (ICP) and keeps the scheme running at the new rate until a comprehensive technical assessment of marginal cost is completed.
The Authority was split. Members Amina Ahmed (Tariff and Finance) and Engineer Maqsood Anwar Khan (Development) dissented, arguing the package should have been suspended until the Ministry of Energy's Power Division submitted a complete, verifiable review. Chairman Waseem Mukhtar then used his casting vote to side with continuation.
The decision has been sent to the federal government for notification in the official Gazette under Section 31(7) of the NEPRA Act, 1997.
Rate applies from November
NEPRA approved the package Dec. 9, 2025, for three years. It was meant to encourage productive electricity use, improve use of available generation capacity and keep industrial consumers from leaving the grid. Eligible industrial and private agricultural consumers pay Rs22.98 per kWh on consumption above their reference level for December 2023 to November 2024.
The revised rate will remain in force until the regulator makes a further decision after the comprehensive review. NEPRA rejected the ministry's request to apply it retroactively to October 2026, noting that October billing was largely finished. Bills already issued for November before notification are to be adjusted in later months.
The regulator stressed that Rs25.30 is a provisional figure. It said the rate is neither a final determination of marginal cost nor proof of what it cost to serve incremental demand in any past month.
Ministry faulted over delays
NEPRA said the first mandatory semi-annual review had not been completed despite repeated directions. The timeline it laid out:
- June 16, 2026: NEPRA asked the Power Division for a comprehensive review covering actual marginal cost, cost-revenue alignment and stakeholder concerns.
- July 29: The ministry supplied data lacking the required marginal cost assessment, workings or recommendations.
- Sept. 2: NEPRA returned the submission as incomplete.
- Sept. 9: The ministry asked NEPRA to carry out the review itself, including a public hearing.
- Oct. 5: NEPRA held the hearing, attended by Power Division officials, the Power Planning and Monitoring Company (PPMC) and other stakeholders.
- Oct. 15: A further ministry response again lacked the requested analysis.
- Oct. 19: NEPRA met PPMC and the Independent System and Market Operator (ISMO) on methodology.
- Oct. 23: The ministry recommended an upward revision.
The Rs25.30 figure came from PPMC, which proposed a generation mix of 50 percent spot RLNG cargoes and 50 percent contracted Qatar RLNG. It recommended the rate as an interim measure from October 2026. NEPRA said the original generation mix cannot automatically be treated as representative of actual marginal generation, given changes in fuel markets, spot RLNG use and dispatch patterns.
Marginal cost estimates higher
Using ISMO hourly dispatch data, NEPRA estimated marginal costs at the consumer end above Rs22.98 in several months. The notional estimate for the review period was Rs29.65 per unit, with monthly figures of Rs42.01 in April and Rs49.65 in May.
NEPRA cautioned that these are not final. In the absence of hourly data on incremental consumption, it assumed monthly incremental units were spread evenly across each month. The hourly cost data also varied from fuel cost adjustment (FCA) workings, and later RLNG price changes approved through FCAs were not included. The regulator said further PLEXOS-based modelling, with and without incremental consumption, is needed.
Costs borne by other consumers
Under the original decision, positive FCAs apply to incremental consumption, but quarterly tariff adjustments (QTAs), the debt service surcharge and negative FCAs do not. If actual marginal cost exceeds the package rate, all consumers cover the difference until NEPRA revises the rate.
NEPRA acknowledged that because of the delayed review and missing data, consumers had paid the gap between actual marginal cost and the package rate through FCAs. It also said excluding incremental units from QTAs raises the adjustment burden on consumers outside the scheme.
Industrial stakeholders argued the first review was due by June 2026 and that any increase should apply from then. They asked that costs already borne by non-beneficiaries be recovered from package users or credited back through later FCA or QTA adjustments. Others raised concerns about rising fuel prices, uncertain RLNG supplies, captive-to-grid migration and whether some subsidized consumption was truly new demand. Some proposed suspending the package or targeting daytime and solar hours.
NEPRA held that captive-to-grid migration does not by itself undermine the package's aim of boosting grid sales and capacity use. It said data show several thousand consumers across eligible categories have benefited. It directed the ministry to devise a way to identify furnace-oil-based captive consumers and act against misuse.
Dissent: rate lacks link to cost
In their dissent, Ahmed and Khan said the Rs25.30 rate lacks a credible link to actual marginal cost, resting on a notional generation mix and updated fuel prices rather than real system conditions. They said the package was designed to be cost-reflective, with beneficiaries paying at least marginal cost so other consumers would not subsidize them.
They said NEPRA's tariff team initially put marginal cost at about Rs31.83 per unit, falling to Rs29.65 after ISMO's operational and must-purchase tags were included. They identified five factors that could have overstated the figure: generation dispatched due to transmission or operational constraints; must-purchase RLNG generation; later RLNG price revisions approved by the Economic Coordination Committee; the need for PLEXOS runs with and without incremental demand; and discrepancies between hourly and monthly FCA data.
They also noted that Rs29.65 exceeds the off-peak rate under the normal tariff structure, which could defeat the package's incentive purpose. They recommended temporary suspension until the ministry submits a complete, verifiable review.
Chairman warns of consequences
Mukhtar said suspension was not appropriate now and that the ministry should get another chance to provide the information. He called the lack of coordination among agencies under the Power Division unfortunate and said the ministry had repeatedly failed to provide reliable data in the required form.
He warned that missing deadlines could bring an adverse outcome in the second review, including suspension or termination of the package. He added that any entity failing to provide the required information on time could face legal proceedings. He asked that his observations be placed before the federal minister and the secretary of the Power Division.
What happens next
NEPRA directed the Power Division to submit a comprehensive review covering the first review period (December 2025 to May 2026) and the second (June to November 2026). It must include PLEXOS modelling using actual dispatch, fuel availability and prices, and operational constraints, compared with a scenario without incremental consumption. It must also reconcile results with FCA workings, include Market Commercial Code operational tags and provide plant-wise data for K-Electric where applicable. Data limitations, assumptions and unresolved variances must be stated, along with their impact on conclusions.
The ministry must also recommend an appropriate rate for each period and whether the package should continue or be revised, suspended, modified or terminated. Available data and analysis are due Nov. 25, with remaining data for Nov. 16-30 due Dec. 3.
NEPRA said each review period will be assessed separately, including whether an upward adjustment is needed. Under the original decision, the package ends immediately if upward adjustments are required in two consecutive reviews.
