Nepra Takes U-Turn on Rs. 42 Billion Penalty Against NTDC

The National Electric Power Regulatory Authority has withdrawn around Rs. 42 billion in penalties imposed on the National Transmission and Dispatch Company, reversing a decision that had remained in place for more than three years over alleged violations of the economic merit order in power dispatch.

In its latest ruling, Nepra said the continued withholding of funds from NTDC’s Use of System Charges did not fully align with the intent of the regulatory framework.

The regulator said issues related to delays in removing transmission constraints should be addressed through enforcement, compliance monitoring and performance mechanisms instead of deductions through monthly fuel cost adjustment proceedings.

The move marks a major shift in Nepra’s stance after the company had argued for years that deductions of about Rs. 41.44 billion were undermining its liquidity and delaying nationally important infrastructure projects.

The dispute had earlier reached the Islamabad High Court, which first stayed the deductions and later referred the matter back to Nepra for a decision on merit.

Following a fresh review, the regulator concluded that its earlier interpretation of economic dispatch had been too narrow. Nepra said the legal framework does prioritize low-cost generation, but also recognizes that economic efficiency must sometimes give way to system security and grid reliability.

The authority said the Nepra Act does not explicitly define economic dispatch, but acknowledges that deviations may be necessary to maintain voltage support and operational stability. In such cases, generation companies may be entitled to compensation from NTDC, it noted.

Nepra had previously held NTDC responsible for the underutilization of efficient power plants and directed the Central Power Purchasing Agency to recover the financial impact by deducting amounts from NTDC’s system charges payable by distribution companies. Those deductions began in September 2019 and continued regularly from August 2020 until October 2023.

NTDC had maintained before both Nepra and the court that the continuing deductions had materially weakened its financial position, threatened compliance with loan covenants and put critical transmission projects at risk.

The regulator has now ordered that the practice of provisionally withholding funds from NTDC’s dues at the fuel cost adjustment stage be discontinued. It said the mechanism for releasing the withheld amount would be decided separately.

In a separate notification, Nepra also approved an additional fuel cost adjustment of about 10 paisa per unit for all electricity consumers, including those served by K-Electric, to be charged in the current billing month.