Inconsistencies in Rs332bn grid revenue flagged

ISLAMABAD: The National Electric Power Regulatory Autho­rity member (tariff and finance) has questioned regulatory and accounting inconsistencies of the national grid’s recently-cleared revenue requirement of Rs332 billion, citing what she described as the ‘mirror image’ of receivables and non-transferred assets.

Nepra member Amina Ahmed pointed out the financial inconsistencies in a detailed dissenting note on a recent 2-1 majority ruling of the regulator, approving a three-year combined revenue requirement for National Grid Company (NGC) at Rs332bn for FY2022-23, FY2023-24 and FY2024-25 for incorporation into consumer-end tariffs through use-of-system charges (UoSC)

The NGC (formerly National Transmission & Despatch Company or NTDC) had sought a total of Rs478bn revenue requirement for three years under the multi-year tariff regime. This included Rs112bn for FY23, followed by 45pc rise to Rs163bn for FY24 and another 25pc rise to Rs203bn for FY25.

In a majority decision issued a few days ago, Nepra allowed a total of Rs332bn revenue for three years. This included Rs81.5bn for FY23, with a 17pc increase to Rs95.6bn for FY24 and then 62pc increase to Rs155bn for FY25. As a consequence, Nepra approved UoSC at Rs382 per kiloWatt a month for FY23, Rs455 per kW for FY24 and Rs710 per kW a month for FY25.

Nepra member says CPPA liability can’t be treated as loan without matching receivable

However, Ms Ahmed challenged the treatment of over Rs19bn, recorded as payable to Central Power Purchasing Agency (CPPA) under the head of current liabilities in NGC’s financial statements for 2023-24. She said the majority decision treated the amount as a loan, subtracted from the NGC’s assets to work out its equity amount. “The diminution in the equity amount has consequently resulted in a proportionate reduction in the permissible return allowed” to the NGC, she wrote.

Under the business transfer agreement (BTA) of June 2015, NGC transferred the assets and liabilities pertaining to the Market Operations Undertaking to CPPA. As the carrying value of liabilities so transferred exceeded the carrying value of assets transferred, a net payable arose, representing the shortfall between the two, she said, adding the BTA has since been extended on multiple occasions and amounted to over Rs19bn as of June 30, 2024.

Correspondingly, an offsetting balance was recognised under the current assets with details given in the Advances and Other Receivables, reflecting an amount recoverable by NGC from certain power sector entities. “A certain portion of these receivables represents the mirror image of the asset not transferred to CPPA,” she said, adding that had this receivable also been transferred to CPPA as part of the same BTA transaction, no such liability would have remained on NGC’s books.

Separately, as per Nepra mechanism, the equity amount was to be computed by aggregating fixed assets and current assets, and then deducting the non-current and current liabilities. “The methodology does not rely upon the actual current assets and current liabilities as reported in the financial statements; instead, they are derived by applying certain prescribed formulae,” she said, arguing that while Nepra guidelines provided formula for computing current assets, the current liabilities, as per the practice, were instead taken as a fixed proportion, i.e. 2/3 of the current assets so arrived at.

As a consequence, she argued that the amount due to CPPA bore no nexus whatsoever with the financing of NGC’s long-term assets. “Accordingly, this amount cannot be equated with loans (long-term) employed for financing the assets... They represent two sides of the same net position; recognising one without the other produces a distorted equity amount,” the member said.

“Either both should be netted off against each other, or both excluded, selectively recognising only the liability, while ignoring its corresponding asset, is not correct,” she added.

Published in Dawn, August 3rd, 2026