ISLAMABAD: In a significant policy shift, National Electric Power Regulatory Authority (NEPRA) has withdrawn penalties amounting to Rs42 billion previously imposed on the National Transmission and Dispatch Company (NTDC) over alleged violations of the Economic Merit Order (EMO) in power plant utilisation.
The decision marks a reversal of a long-standing stance under which NEPRA had been deducting billions from NTDC’s Use of System Charges payable by distribution companies. These deductions, spanning over three years, had significantly impacted NTDC’s financial position and delayed key national transmission projects.
The matter had also reached the Islamabad High Court, which initially stayed the deductions and referred the case back to the regulator for reconsideration.
Upon re-evaluation, NEPRA concluded that its earlier approach was not fully aligned with the legal and regulatory framework. It noted that continuing to withhold financial impacts linked to EMO violations during fuel cost adjustment (FCA) proceedings was not consistent with regulatory intent.
“The Authority is of the considered view that withholding such amounts does not fully align with the framework,” NEPRA stated, adding that the practice of deducting these amounts at the FCA stage would now be discontinued. The mechanism for releasing the withheld Rs41.44 billion will be determined separately.
The regulator clarified that while economic dispatch prioritises least-cost generation, it must be balanced with system reliability and operational requirements. It emphasized that deviations from EMO can be necessary to maintain grid stability, and such instances are recognised within the legal framework.
NEPRA also acknowledged that inefficiencies and delays in removing system constraints had led to avoidable costs for consumers, but said these should be addressed through targeted enforcement and performance monitoring rather than financial withholding.
Previously, NEPRA had directed the Central Power Purchasing Agency to deduct EMO-related FCA impacts from NTDC dues. These deductions began in September 2019 and continued regularly from August 2020 to October 2023.
NTDC had consistently argued that the penalties severely strained its liquidity, risking breaches of loan covenants and hindering the execution of critical infrastructure projects. With this latest decision, the regulator has effectively eased financial pressure on the national transmission utility while redefining the treatment of EMO deviations within Pakistan’s power sector.
Story by Khaleeq Kiani
