The National Electric Power Regulatory Authority (NEPRA) has provisionally increased the incremental electricity consumption rate for industrial and agricultural consumers from Rs22.98 to Rs25.30 per unit.
The regulator warned that delays by the government in providing a comprehensive cost assessment could leave consumers outside the scheme bearing additional electricity costs.
The decision, issued on November 6, applies to consumers of ex-WAPDA distribution companies and K-Electric from November 2026 billing. It follows a review of the Incremental Consumption Package (ICP) and keeps the scheme operational at the revised rate until NEPRA completes a comprehensive technical assessment of marginal electricity costs.
The Authority reached the decision after a split vote. Members Amina Ahmed (Tariff and Finance) and Engineer Maqsood Anwar Khan (Development) opposed continuing the package without a complete and verifiable review from the Ministry of Energy’s Power Division.
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Chairman Waseem Mukhtar used his casting vote to support continuation of the scheme.
NEPRA has forwarded the decision to the federal government for notification in the official Gazette under Section 31(7) of the NEPRA Act, 1997.
Revised Electricity Rate Applies from November
NEPRA approved the Incremental Consumption Package on December 9, 2025, for three years. The scheme aims to encourage productive electricity consumption, improve utilisation of available generation capacity and discourage industrial consumers from leaving the national grid.
Under the package, eligible industrial and private agricultural consumers pay Rs22.98 per kilowatt-hour for electricity consumed above their reference level. The reference period covers December 2023 to November 2024.
The revised rate of Rs25.30 will remain in force until NEPRA makes another decision following the comprehensive review.
The regulator rejected the ministry’s request to apply the increase retrospectively from October 2026, noting that most October billing had already been completed. Electricity bills issued for November before the notification will be adjusted in subsequent months.
NEPRA clarified that Rs25.30 is a provisional rate, not a final determination of marginal electricity costs. It also does not establish the actual cost of supplying incremental demand in any previous month.
NEPRA Criticises Ministry Over Delayed Review
NEPRA said the Power Division had failed to complete the first mandatory semi-annual review despite repeated directions.
The regulator outlined the following timeline:
- June 16, 2026: NEPRA asked the Power Division to submit a comprehensive review covering actual marginal costs, cost-revenue alignment and stakeholder concerns.
- July 29: The ministry submitted data without the required marginal cost assessment, supporting calculations or recommendations.
- September 2: NEPRA returned the submission, declaring it incomplete.
- September 9: The ministry asked NEPRA to conduct the review itself, including a public hearing.
- October 5: NEPRA held a public hearing attended by Power Division officials, the Power Planning and Monitoring Company (PPMC) and other stakeholders.
- October 15: The ministry submitted another response that lacked the requested analysis.
- October 19: NEPRA met PPMC and the Independent System and Market Operator (ISMO) to discuss the methodology.
- October 23: The ministry recommended increasing the incremental consumption rate.
The revised rate came from a PPMC proposal based on a generation mix comprising 50% spot RLNG cargoes and 50% contracted Qatar RLNG. PPMC recommended the rate as an interim measure from October 2026.
However, NEPRA said the original generation mix could not automatically represent actual marginal generation because fuel markets, spot RLNG usage and electricity dispatch patterns had changed.
Marginal Electricity Cost Estimates Exceed Package Rate
Using ISMO’s hourly dispatch data, NEPRA estimated that marginal electricity costs at the consumer end exceeded the existing Rs22.98 package rate in several months.
The regulator calculated a notional average marginal cost of Rs29.65 per unit for the review period. Its estimates reached Rs42.01 per unit in April and Rs49.65 in May.
However, NEPRA cautioned that these figures were not final determinations.
In the absence of hourly data on incremental electricity consumption, the regulator assumed that monthly incremental units were distributed evenly throughout each month.
NEPRA also identified differences between hourly cost data and fuel cost adjustment (FCA) calculations. Later RLNG price revisions approved through FCAs were not included in the estimates.
The regulator said it needed further PLEXOS-based modelling to compare electricity system costs with and without incremental consumption.
Other Electricity Consumers May Bear Additional Costs
Under the original package, positive fuel cost adjustments apply to incremental consumption. However, quarterly tariff adjustments (QTAs), the debt service surcharge and negative FCAs do not apply to those units.
If the actual marginal cost exceeds the package rate, all consumers bear the difference until NEPRA revises the rate.
The regulator acknowledged that delays in the review and missing data had resulted in consumers paying the gap between actual marginal costs and the package rate through FCAs.
It also noted that excluding incremental units from QTAs increases the adjustment burden on consumers outside the scheme.
Industrial stakeholders argued that NEPRA should have completed the first review by June 2026. They maintained that any increase should have taken effect from that date.
Some stakeholders also called for recovering costs previously borne by non-beneficiaries from package users or returning the amounts through future FCA or QTA adjustments.
Other concerns included rising fuel prices, uncertain RLNG supplies, migration from captive power generation to the national grid and whether subsidised consumption represented genuinely new electricity demand.
Some participants proposed suspending the package or limiting its benefits to daytime and solar-generation hours.
NEPRA maintained that migration from captive generation to the national grid did not, by itself, undermine the package’s objective of increasing grid sales and improving capacity utilisation.
The regulator said several thousand consumers across eligible categories had benefited from the scheme. It also directed the ministry to develop a mechanism to identify captive power consumers using furnace oil and take action against misuse.
Two NEPRA Members Oppose Revised Rate
In their dissenting opinions, Amina Ahmed and Engineer Maqsood Anwar Khan argued that the proposed Rs25.30 rate lacked a credible link to actual marginal electricity costs.
They said the calculation relied on a notional generation mix and updated fuel prices rather than actual system conditions.
According to the dissenting members, the package was designed to remain cost-reflective, requiring beneficiaries to pay at least the marginal cost of electricity so that other consumers would not subsidise their consumption.
They said NEPRA’s tariff team had initially estimated marginal costs at approximately Rs31.83 per unit. The estimate later fell to Rs29.65 after ISMO included operational and must-purchase tags.
The members identified five factors that could have overstated the estimate:
- Electricity generation dispatched because of transmission or operational constraints.
- Must-purchase RLNG-based generation.
- Later RLNG price revisions approved by the Economic Coordination Committee.
- The need for PLEXOS modelling with and without incremental electricity demand.
- Discrepancies between hourly data and monthly FCA calculations.
They also observed that the estimated Rs29.65 marginal cost exceeded the off-peak rate under the normal electricity tariff structure, potentially undermining the package’s incentive.
The dissenting members recommended temporarily suspending the scheme until the ministry submitted a complete and verifiable review.
NEPRA Chairman Warns of Possible Suspension
Chairman Waseem Mukhtar opposed immediate suspension, saying the ministry should receive another opportunity to provide the required information.
He described the lack of coordination among agencies working under the Power Division as unfortunate and criticised the ministry for repeatedly failing to submit reliable data in the required format.
Mukhtar warned that further missed deadlines could lead to an adverse outcome during the second review, including suspension or termination of the package.
He also said entities that failed to provide the required information on time could face legal proceedings.
The chairman directed that his observations be placed before the federal minister and the secretary of the Power Division.
Power Division Given Deadlines for Comprehensive Review
NEPRA has directed the Power Division to submit a comprehensive assessment covering two periods:
- First review: December 2025 to May 2026.
- Second review: June to November 2026.
The assessment must include PLEXOS modelling based on actual electricity dispatch, fuel availability, fuel prices and operational constraints. It must compare the results with a scenario in which incremental consumption does not take place.
The ministry must also reconcile the findings with FCA calculations, include operational tags from the Market Commercial Code and provide plant-wise data for K-Electric, where applicable.
It must disclose data limitations, assumptions and unresolved differences, along with their impact on the conclusions.
The Power Division must recommend an appropriate rate for each review period and state whether the package should continue, undergo revision, be modified, suspended or terminated.
NEPRA set November 25 as the deadline for available data and analysis. The remaining data covering November 16 to 30 must be submitted by December 3.
The regulator will assess each review period separately and determine whether an upward adjustment is necessary.
Under the original decision, the package will end immediately if upward adjustments become necessary in two consecutive reviews.
