Net Metering Regulations: Nepra facing frustrating situation

National Electric Power Regulatory Authority (Nepra) is facing a frustrating situation in so far as approval of amendments to Net Metering Regulations is concerned as the “affected” influential parties have pressurized the government to put the proposed decision on hold, well-informed sources told Business Recorder.

Power Division, sources said, has already conveyed its dismay to the regulator on its “speed” on Net Metering decision after received “misperceived” complaints from many influential stakeholders, including Federation of Pakistan Chambers of Commerce and Industry (FPCCI), approached the Prime Minister’s Office to stop the regulator from announcing its decision.

Meanwhile, Competition Commission of Pakistan (CCP) in a letter to Chairman Nepra claims that it has also received concerns regarding recent proposed/draft amendments, in sub-regulation 5 of Regulation 14 of the National Electric Power Regulatory Authority (Alternative & Renewable Energy) Distributed Generation and Net Metering Regulations, 2015.

The amendments as proposed by Nepra envisage that the price payable for net kWh by Discos to Distributed Generators will be the National Average Energy Purchase Price (NAEPP) instead of the National Average Power Purchase Price (NAPP).

According to CPP, currently the National Average Power Purchase (NAPP) of Rs. 19.32kWh is applicable, which as per the amendments will stand replaced by the National Average Energy Purchase Price (NAEPP), which is Rs 9/kWh.

The government, since 2006, has encouraged the development of renewable energy projects by offering various incentives under federal government policies. A large proportion of the existing renewable capacity has been set up under the Renewable Energy Policy 2006 framework and, more recently, the Alternative and Renewable Energy Policy 2019 offers a similar array of incentives to increase the quantum of renewables in energy mix.

To this end, CCP has proposed a meeting with senior officer or officers concerned to understand viewpoint of the regulator on different issues brought to its notice.

The ARE Policy 2019 sets ambitious, albeit achievable, targets, promising a 20 percent renewable energy generation capacity by 2025 and at least 30 per cent by 2030. Broadly, for the issues/concerns highlighted, it is apprehended that the net metering policy under consideration of revision, if formalized, may act to the detriment of those who produce and consume and would attract competition concerns: (i) the prosumers/Distributed Generators (‘DGs’) have made investment in solar systems premised on policy provisions that are now being altered to their detriment. Such amendment would result in discrimination of treatment against DGs particularly keeping in view the existing agreements/arrangement with their respective Discos and a Distributed Generator Licence from Nepra; (ii) DGs sell excess units generated to DISCOs and are thus engaged in the provision of a service and are expected to be treated at par with other power generation companies, IPPs, CPPs etc. The proposed amendment puts these DGs at a disadvantage vis-a-vis other generation companies who are selling electricity to the system at Energy Purchase Price (EPP) plus Capacity Purchase Price (CPP); and (iii) the proposal to provide only EPP payment to DGs also seems counter-intuitive since solar energy does not have any EPP component and it does not consume any fuel or have similar associated variable costs.

According to CCP, as per Nepra’s own figures regarding the capacity and energy invoiced by power generators, the entire amount invoiced by solar generators is under the head of capacity charges.

CCP further argues that under the proposed amendments, seemingly the DGs are not to be treated at par with Solar IPPs. The average EPP+CPP for solar IPPs is calculated by Nepra at Rs 21.22/kWh. Out of this, the EPP component is zero and CPP is Rs 21.22/kWh. Whereas, in some instances, the solar IPPs are paid up to Rs 34/kWh. Contrary to this, the revised rates for DGs are at Rs 9/kWh.

CPP maintains that excess units produced by DGs are purchased by the respective DISCOs which, after this proposed amendment, will essentially purchase units at Rs 9/kWh from DGs and sell these back to other end user consumers on the grid at a significant mark-up approximately at Rs 28.07kWh.

Pakistan’s energy sector is dependent on imported fuels, given limited domestic energy sources. Costly thermal power accounted for the highest share (60%) of Pakistan’s electricity generation mix in 2021-22 with share of renewables standing at a meagre 4%. As per Nepra’s figures, in the FY21-22, Pakistan spent a total of Rs 1.29 trillion on fuel costs for thermal based plants. DGs on the other hand exported 150.67 (MWh) in 2021-22 and resulted in savings of costly RFO or HSD run thermal plants.

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