NEPRA approves dual tariff structure for Cold Storage Industry after legal review

ISLAMABAD: National Electric Power Regulatory Authority (NEPRA) on Tuesday approved two distinct tariffs for the Cold Storage industry, depending on the nature of their business activities. The decision follows a prolonged legal dispute involving courts and government ministries.
According to the details, in order to address the inconsistencies in the XW-DISCOs billing practices for cold storage facilities, the Authority vide determination dated June 2, 2022, placed the cold storage facilities under the category of “Commercial Tariff’ which was notified by the Federal Government on July 25, 2022. 3. Thereafter, several consumers of cold storages facilities submitted representations/complaints before the Authority raising the observations regarding applicability of commercial tariff on cold storages contending that this change, adversely affects their billing and operational costs and requested that industrial tariff be applied to the cold storages.
In order to address the grievances of such consumers and ensure a fair examination of their plea, the Authority decided to hold a public hearing. Accordingly, a public hearing was held on June 06, 2023 which was attended by the stakeholders including representatives from the DISCOs and the All-Pakistan Cold-Storage Association.
Meanwhile, many other industrial consumers challenged the determination of the Authority in the matter of Fuel Price Adjustment (FCA) along with cold storage decision of June 2, 2022 before the Honorable Lahore High Court, Lahore in WP. No. 50725 of 2022 titled as Muhammad Azhar Siddique Vs. Federation of Pakistan, etc. The Honorable Lahore High Court, in its Judgement dated February 6, 2023 directed NEPRA “not to unilaterally change the type of tariff from Industrial to Commercial without hearing such consumers.”
The order of High Court was challenged in Supreme Court which remanded of matter to NEPRA should not be disturbed. Learned counsel for the concerned DISCO and NEPRA state that they have no objection provided NEPRA decides the same independently without being influenced by anything observed in the impugned judgment. Accordingly, NEPRA is directed to decide the same in accordance with the law, and without in any manner being influenced by anything stated in the impugned judgment.”
The matter passed through different stages within the Ministries and other forums. Being aggrieved with the above decision of the Authority, the following stakeholders filed MLR before the Authority under NEPRA (Review Procedure) Regulations, 2009, raising the observations regarding applicability of commercial tariff for cold storages: i. M/s. ECKO Warehousing & Logistics ii. M/s. Glaciers (Private) Limited iii. M/s. Connect Logistics iv. Muhammad Arif Bilwani.
After passage of a long time and repeated requests from the petitioners, the regulator has issued determination which is as follows ;(i) cold storages, which are involved in processing, value addition & long term preservation of goods especially in sectors including but not limited to the agriculture, food processing, pharmaceuticals, etc. shall be placed under the “Industrial Tariff’ and ;(ii) Cold Storages, which handle short-term storage for retail and distribution without significant value addition, shall be placed under “Commercial Tariff’.
Member (Law ) Amina Ahmed, in her separate note stated whilst she does not necessarily disagree with the concept of some kind of intelligent bifurcation / differentiation of the tariff applicable to cold storage facilities (i.e. the application of the industrial tariff on certain cold storage facilities and the application of the commercial tariff on other cold storage facilities), the instant decision suffers from fundamental lack of clarity, lacks adequate effort and relies almost entirely on restating the definition of the industrial tariff.
The decision of the Authority is premised on a differentiation that cold storage facilities involved in processing, value addition & long-term preservation of goods’” especially in sectors including but not limited to agriculture, food processing, pharmaceuticals, etc. should be placed under the industrial tariff and cold storages facilities which handle short-term storage for retail and distribution without significant value addition, should be placed under the commercial tariff.
The instant decision merely and entirely replicates the very definition of the activities expressly defined as qualifying for the industrial tariff (the NEPRA approved terms and conditions attached to the consumer end tariff determinations state that an industry is a bona fide undertaking or establishment engaged in manufacturing, value addition and/or processing of goods”) with the addition of “long term preservation.
Another change is that the word ’or’ given in the aforementioned terms and conditions has been omitted, meaning thereby that cold storage facilities now have to meet all three conditions – processing, value addition, and long-term preservation of goods, to qualify for the industrial tariff. Instead of the Authority deciding on whether cold storage facilities meet the qualifying criteria for the industrial tariff, the instant decision by simply regurgitating the criteria leaves it to the distribution companies/supplies of last resort to interpret and decide.
Further, no guidance has been provided on the meaning of “long term preservation” and what duration of storage constitutes long-term preservation. Similarly, no clarity has been offered on what “without significant value addition means and how this will be assessed to classify cold storage facilities under the commercial tariff. This is not only ambiguous but is also completely subjective. The instant decision can lead to different distribution companies/suppliers of last resort charging similar cold storage facilities, different tariffs or even the same distribution company/supplier of last resort charging similar cold storage facilities, different tariffs – these facilities will be entirely at the mercy of the distribution companies/suppliers of last resort who will no doubt be prone to self-serving interpretation often on a case to case basis. Without clear and objective distinction, there is ample room for ambiguity and inconsistent interpretation, which may result in arbitrary application across different cases, which to my mind is not only undesirable and counterproductive but is also a recipe for precipitating future conflicts/disputes. Ends