Nepra walks back Rs42bn penalties on National Transmission and Dispatch Company

In a significant regulatory shift, the National Electric Power Regulatory Authority (Nepra) has rescinded penalties totaling Rs42 billion against the National Transmission and Dispatch Company (NTDC). This move represents a major U-turn for the regulator, which had for years penalized NTDC over alleged violations of the economic merit order (EMO) in managing power plant operations. The NTDC had consistently argued that these deductions were hindering crucial national infrastructure projects. The Islamabad High Court had previously intervened, staying the deductions and referring the matter back to Nepra for a thorough review. Upon re-evaluation, Nepra acknowledged that its earlier stance was not fully supported by the existing legal and regulatory framework. The Authority concluded that the practice of withholding funds based on EMO violations did not align with the regulatory framework's intent. While acknowledging consumer costs from delayed constraint resolutions, Nepra stated these issues are better addressed through targeted enforcement rather than financial penalties at the fuel cost adjustment stage. This decision effectively reverses a three-year-old policy, paving the way for the release of the substantial withheld funds, the mechanism for which will be determined later. This regulatory adjustment highlights the complexities of balancing economic efficiency with system security in Pakistan's power sector.

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The Authority is of the considered view that continuation of the practice of withholding financial impact based on EMO violation does not fully align with the intent of the regulatory framework.