ISLAMABAD: The National Electric Power Regulatory Authority (NEPRA) has approved a uniform structure of Use of System Charges (UoSC) for power bulk consumers (PBCs) of distribution companies (Discos) and K-Electric (KE), paving the way for the launch of a competitive wholesale electricity market.
The decision is expected to facilitate the federal government’s plan to auction 400 MW of electricity in the first phase, instead of the 200 MW initially envisaged under the competitive wheeling framework.
NEPRA announced the determination after considering submissions from the Power Division, Independent System and Market Operator (ISMO), K-Electric and other stakeholders on the mechanism for determining and settling UoSC, including inter-DISCO differentials, cross-subsidies and transmission and distribution (T&D) losses.
The Power Division had proposed that the impact of inter-DISCO differentials arising from the uniform application of UoSC should not be imposed exclusively on wheeling consumers.
A draft adjustment mechanism for settling inter-DISCO differentials had been prepared and circulated among the Power Division and other stakeholders for comments.
In a letter dated July 30, 2026, the Power Division supported the proposed adjustment mechanism and reiterated its position that the impact of differentials should be passed on to wheeling consumers.
However, ISMO and K-Electric opposed the proposal, arguing that it could result in different UoSC for open-access consumers compared with similarly placed consumers supplied by suppliers of last resort (SOLRs). They also maintained that charging such differential costs to wheeling consumers would not be consistent with the National Electricity Policy 2021 and National Electricity Plan 2023-27.
Subsequently, the Power Division, in its communication of August 5, 2026, informed NEPRA that a meeting had been held on August 3 under the chairmanship of the Minister for Energy to clarify the government’s position on the adjustment mechanism for UoSC, including cross-subsidisation and T&D losses.
The Power Division reaffirmed that the same and uniform UoSC, including cross-subsidy, should apply to equally placed consumers irrespective of their supplier.
It argued that any inter-DISCO differential arising from the uniform application of UoSC should instead be settled through an inter-DISCO settlement mechanism similar to the existing arrangement for the uniform end-consumer tariff.
ISMO subsequently submitted a draft mechanism on August 12 for settlement of inter-DISCO UoSC differentials.
After considering the submissions, NEPRA held that the paramount principle was to ensure that UoSC applicable to open-access consumers remained equal to those applicable to similarly placed consumers of SOLRs.
The regulator concluded that imposing inter-DISCO differentials exclusively on wheeling consumers would result in different UoSC for them and undermine the principles of uniformity and non-discrimination.
Accordingly, NEPRA agreed with the Power Division that such differentials should not be passed on exclusively to wheeling consumers.
The regulator also approved uniform T&D loss factors for open-access consumers.
Based on the T&D losses of individual Discos, NEPRA determined that the uniform loss factor at the 11kV level worked out to 8.04 percent, instead of the 8.42 percent claimed by the Power Division.
For consumers connected at 132kV, the regulator approved a uniform loss factor of 1.51 percent, as proposed by the Power Division.
Under the approved structure, uniform variable grid charges for consumers participating in the competitive wheeling auction process range from Rs6.23 to Rs19.62 per unit, depending on the consumer category. A fixed grid charge of Rs1 per kW per month, based on sanctioned load, will also be applicable.
The approved variable UoSC for different categories are: Rs6.23/kWh for B-3, Rs9.09/kWh for B-4, Rs14.95/kWh for C-3, Rs19.62/kWh for C-2(a), Rs17.74/kWh for C-2(b), Rs19.14/kWh for A-2(c), Rs19.10/kWh for A-3 and Rs6.72/kWh for D-2(b).
The UoSC comprises transmission charges, distribution charges and cross-subsidy.
For instance, the Rs6.23/kWh UoSC for B-3 consumers comprises Rs1.60/kWh transmission charges, Rs1.99/kWh distribution charges and Rs2.63/kWh cross-subsidy.
Similarly, the Rs9.09/kWh charge for B-4 consumers comprises Rs1.26/kWh transmission charges, Rs2.78/kWh distribution charges and Rs5.05/kWh cross-subsidy.
NEPRA also approved stranded-cost components for consumers opting for open access without participating in the competitive wheeling auction.
The stranded-cost component has been set at Rs12.94/kWh for consumers connected at 11kV and Rs16.35/kWh for consumers connected at 132kV/66kV.
Consequently, the total variable UoSC, including stranded costs, has been determined at Rs19.17/kWh for B-3, Rs25.45/kWh for B-4, Rs31.30/kWh for C-3, Rs32.56/kWh for C-2(a), Rs30.68/kWh for C-2(b), Rs32.08/kWh for A-2(c), Rs32.04/kWh for A-3 and Rs19.66/kWh for D-2(b).
The federal government had specifically sought application of uniform UoSC to K-Electric, arguing that any resulting financial gap should be addressed through an additional charge rather than through a government subsidy.
NEPRA decided that the additional charge would be applied to all consumers, including open-access consumers and consumers of SOLRs, thereby maintaining the principle of uniformity.
On the issue of differentials arising from uniform T&D losses, NEPRA noted that although ISMO had proposed a settlement mechanism, the proposal had not yet been thoroughly deliberated among all stakeholders.
The regulator further observed that the National Electricity Plan 2023-27 requires NEPRA to prescribe a mechanism for settling inter-DISCO differentials arising from the application of uniform UoSC, but does not specifically require a mechanism for energy differentials resulting from uniform T&D losses.
NEPRA, therefore, decided not to approve any mechanism for such differentials at this stage.
The Power Division, Discos, ISMO, K-Electric and other relevant entities have been directed to deliberate on the matter and determine, during the proceedings for next year’s UoSC, whether implementation of uniform T&D losses actually results in such differentials. If so, they will be required to propose a mechanism for their settlement after consultation with all relevant stakeholders. Ends
