ISLAMABAD : In an eye opening dissenting note, Member (Technical ) NEPRA, Rafique Ahmad Shaikh has thrown the decision of Authority in which the later has allowed withheld amount of Rs 40 billion to NGC( erstwhile ) NTDC, which is already under criticism at different parliamentary forums for corruption and taking decisions for the blue eyed parties.
” I respectfully dissent from the majority decision to shift the burden of inefficiencies—specifically those attributable to NTDC (now NGC)—onto electricity consumers, who bear no responsibility for these systemic failures,” Mr. Shaikh added.
He said that the need for power sector reform arose from long-standing inefficiencies that undermined the sector’s performance. In 1992, a comprehensive restructuring plan was introduced with the aim of corporatizing or privatizing power sector entities to improve operational efficiency, transparency, and service delivery. However, more than three decades later, these goals remain largely unachieved. The continued operation of power sector entities within the public sector, along with the failure to implement meaningful corporatization or privatization, has led to cumulative losses amounting to trillions of rupees— driven largely by inefficiencies in planning, execution, and operations.
” Rather than improving, the sector has grown increasingly burdened by structural inefficiencies, threatening its long-term viability. One of the most pressing examples is the role of NTDC, which, under its license, is mandated to provide a congestion-free transmission network to ensure efficient and cost-effective power delivery. Despite repeated directives and enforcement actions, NTDC has consistently failed to plan, implement, and operate its transmission system in a manner that supports this mandate. Consequently, consumers continue to suffer the consequences of these inefficiencies—both operationally and financially,” he added.
According to Member (Technical) historically, the Authority had acknowledged these persistent shortcomings. In January 2021, a decision was made not to pass the financial impact of NTDC’s inefficiencies—especially merit order violations onto consumers. This approach remained in place from Sep, 2019 and Aug 2020 to Oct 2023. However, in May 2024, a shift occurred, allowing for the possibility of releasing withheld payments related to out-of-merit operations.
The operation of power plants in violation of the Economic Merit Order (EMO) has remained a recurring issue, primarily due to the inability of the transmission system to evacuate power efficiently. The Monitoring & Enforcement Department has regularly quantified the monthly financial impact of these violations over the past five years, with comprehensive assessments also undertaken by independent consultants and a third-party firm. These studies unanimously attribute the resulting inefficiencies—and associated financial losses—to NTDC’s operational and planning failures.
Between July 2019 and October 2023, out-of-merit generation due to transmission constraints led to avoidable costs of approximately Rs. 41 billion . The Authority had previously withheld this amount to protect consumers from being unfairly burdened by NTDC’s inefficiencies. Although out-of merit generation continued beyond October 2023 and incurred a cost of around Rs. 85 billion by June 2025, this amount could not be withheld an4 was ultimately passed on to consumers. I have the considered opinion ought to be recovered from NTDC.
Moreover, the financial burden on consumers has extended beyond merit order deviations. Approximately Rs. 50 billion in additional costs was passed on to consumers due to RLNG shortages—another inefficiency rooted in poor coordination and inadequate supply chain planning. Independent assessments, including the Joint Venture (JV) report and the USAID expert evaluation, corroborate that these losses stem from NTDC’s chronic delays, weak planning, and ineffective execution. Compounding these concerns is NTDC’s failure to complete approved investment projects within stipulated timelines. The Lahore North Grid Station is a case in point, where significant delays have not only led to the underutilization of the HVDC line but also curtailed the evacuation of cost-effective southern generation. Every delay and cost overrun directly translates into inflated consumer tariffs and undermines the Authority’s efforts to ensure accountability.
It is important to note that NTDC has received an investment of Rs 570 billion from FY20! 8 to FY 2025, which has been paid for by consumers through tariffs. It has been observed that time and cost overruns are recurring issues in nearly every NTDC project. These delays not only lead to significant increases in overall project costs but also contribute to higher tariffs, driven by the increased operational expenses associated with delayed implementation. Moreover, the absence of a formal, commercially binding service level agreements between NTDC and other key stakeholders, such as the DISCOs, further exacerbates the problem. Establishing such an agreement is critical, as it would provide a structured and enforceable framework to uphold service standards and ensure operational accountability across all parties involved. The Authority’s decision, under-signature, to uphold its earlier stance of not withholding fuel charges on account of Economic Merit Order (EMO) violations — and to reverse its prior decision to pass on the previously withheld amount of Rs. 41 billion to consumers — effectively shifts the burden of inefficiencies onto electricity consumers, despite no fault of their own. This reversal, particularly while many of the underlying systemic constraints remain unresolved, not only compromises consumer protection but also undermines the regulatory credibility of the Authority. Furthermore, the Authority has decided that, for future monitoring and reporting of EMO (Economic Merit Order) violations, the M&E Department will no longer forward the violation amounts to the Tariff Department. Instead, the mailer will be presented to the Authority on a biannual basis. In this regard, I would like to refer to the Authority’s earlier decision (copy attached as Annex-C) issued in the Monthly FCA determination for February 2021, which clearly states that EMO violation details, along with their financial impact, shall be submitted to the Authority on a monthly basis.
Therefore, he has maintained that the original approach of monthly basis should continue for the following reasons ;(i) recurring inefficiencies and violations should be reported to the Authority as promptly as possible to enable timely corrective actions ; and (ii) this will ensure all stakeholders — including electricity consumers — are kept informed about the lack of action by power sector entities, whose inefficiencies directly impact consumers.
Ideally, there should be legally binding commercial agreements between Generation Companies (IPPs/GENCOs), the Transmission Company (NTDC/NGC), and Distribution Companies (DISCOs). In situations where the most economical (cheapest) available power is not delivered to end consumers, the corresponding capacity payments should be withheld from the generation companies for the undelivered energy. Additionally, penalties should be imposed on any entities responsible for such inefficiencies, as they contribute to increased operational costs within the power sector. Where the failure to deliver cost-effective power arises due to network constraints on the pan of the transmission or distribution companies (NOC or DISCOs), the resulting financial losses should be recovered from the respective responsible entities. At a minimum, the burden of inefficiencies caused by power sector entities should not be passed on to electricity consumers through higher costs when the consumers are not at fault.
” In light of the above, I disagree with the decision to release of the withheld amount and pass on to the electricity consumers as Prior Year Adjustments (PYA). Doing so would signal regulatory leniency in the face of persistent non-performance and inefficiency. It would also set a precedent, potentially inviting further complacency from sector entities at the expense of consumers,” he concluded.
