NEPRA Member Tariff raises questions over Authority’s treatment of Rs 19.7 bn payable to CPPA-G

ISLAMABAD: Member (Tariff and Finance) of the National Electric Power Regulatory Authority (NEPRA), Amina Ahmed has raised serious questions over the Authority’s treatment of Rs 19.752 billion payable to Central Power Purchasing Agency–Guarantee (CPPA-G) in the Use of System Charges (UoSC) tariff determination of National Grid Company (NGC), arguing that the decision has unjustifiably reduced the company’s allowable return.
The Member disagreed with the majority decision to treat the amount—recorded under current liabilities in NGC’s financial statements for FY 2023-24—as a loan and deduct it from assets for calculating equity. According to the dissent, such treatment has led to an artificial reduction in equity, thereby proportionately lowering the permissible return for the company.
The disputed liability originates from the Business Transfer Agreement (BTA) signed on June 3, 2015, between NGC (formerly NTDC) and CPPA-G, under which market operation assets and liabilities were transferred. As the liabilities exceeded the assets transferred, a net payable emerged, which now stands at Rs 19.752 billion as of June 30, 2024.
The Member pointed out that a corresponding receivable exists on NGC’s books under “Advances and Other Receivables – Due from Related Parties,” representing amounts recoverable from power sector entities. He argued that this receivable is effectively the mirror image of the liability and should be treated consistently.
“Recognizing the liability without accounting for the corresponding asset distorts the equity position,” the note stated, adding that either both amounts should be netted off or excluded altogether. Selective treatment of only the liability, it emphasized, is neither logical nor economically justified.
The Member further argued that the payable to CPPA-G bears no relationship with long-term financing of assets and, therefore, cannot be categorized as a loan. Treating it as such, she maintained, lacks any sound financial or regulatory basis.
Additionally, the dissent highlighted inconsistencies with NEPRA’s own Guidelines for determination of revenue requirement and Use of System Charges, under which current liabilities are typically derived as two-thirds of computed current assets rather than taken directly from financial statements. Including the CPPA-G payable separately, the Member noted, effectively inflates liabilities beyond the prescribed formula.
Beyond the specific issue, the Member (Tariff and Finance) also questioned the broader tariff determination methodology, criticizing the reliance on historical financial statements. She called for a shift toward a more forward-looking, performance-based regulatory framework that aligns revenue requirements with efficiency benchmarks.
She also advocated for transitioning from annual determinations to multi-year tariff regimes to enhance predictability and stability for both utilities and consumers.
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