Nepra Urges Overhaul of Electricity Sector

Web DeskFebruary 4, 20243164 min
Nepra Urges Overhaul of Electricity Sector

The National Electric Power Regulatory Authority (Nepra) has issued a comprehensive State of Industry Report 2023, urging the government to take decisive actions in reforming the electricity sector. Nepra emphasized the need to abolish cross-subsidies and multiple taxes within electricity tariffs to alleviate the burden on consumers. Additionally, the regulator called for the breakup of distribution companies and the introduction of private sector competition at the feeder level to enhance efficiency.

In its critical assessment, Nepra condemned the government-sanctioned practice of revenue-based load shedding, pointing out its adverse impact on honest consumers unfairly penalized for the actions of others. The report advocated for governance and technology-driven solutions to address these issues effectively.

Also Read: NEPRA Approves Rs. 3.28/Unit Tariff Increase for 6 Months

The annual flagship report highlighted significant governance, planning, and operational shortcomings across the power sector’s fuel supply, generation, distribution, and transmission systems. Nepra stressed the inevitability of an across-the-board overhaul to address these challenges.

The report expressed concern over the escalating circular debt, outstanding payments of over Rs900 billion from current defaulters, a struggling 92% bill recovery rate, and persistently high system losses. It identified various factors contributing to the higher cost of electricity, including fuel costs, rupee devaluation, capacity payments, circular debt, reduced electricity usage, transmission losses, theft, and poor governance.

Nepra criticized the government’s policy of a uniform tariff for all companies, highlighting the practice of cross-subsidization that burdens consumers of efficient distribution companies with the financial shortcomings of underperforming counterparts. The regulator called for urgent rectification of this dynamic.

Furthermore, Nepra called for a redesign of the billing format to clearly differentiate core electricity charges from supplementary elements such as taxes, duties, fees, and surcharges. It emphasized the need for horizontal restructuring of power distribution companies to enhance competition, efficiency, and innovation within the sector.

The proposed horizontal restructuring aims to create a more level playing field, encourage private sector involvement, and stimulate investment in the distribution sector. By breaking down monopolies into smaller units, the approach fosters accountability, promotes customer-centric service delivery, and allows for greater adaptability to local conditions and needs.

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