Nepra maintains commercial tariff for cold storages despite dissent

The National Electric Power Regulatory Authority (NEPRA) has reaffirmed its stance to classify cold storage facilities under the commercial tariff category.

The decision was communicated to all power distribution companies (DISCOs), including K-Electric, instructing them to bill cold storage units according to the terms and conditions of the commercial tariff as notified on July 25, 2022.

Despite dissenting opinions from two NEPRA members, the authority emphasized that cold storage facilities do not qualify for the industrial tariff, as they are primarily engaged in storage rather than manufacturing, processing, or value-addition activities.

NEPRA Member (Technical) opposed the decision, arguing that a blanket classification of cold storage under a single tariff category is not appropriate. Similarly, Member (Law) disagreed with the categorization, highlighting the need for a more nuanced approach.

The debate over the tariff categorization for cold storage dates back to March 2021, when Quetta Electric Supply Company (QESCO) sought clarification on the matter. NEPRA initially stated that the industrial tariff could only apply if cold storage performed activities such as value addition or manufacturing. Purely storage-oriented facilities were deemed eligible for the commercial tariff.

Inconsistencies in billing practices among DISCOs led NEPRA to issue a formal decision on June 2, 2022, placing cold storage in the commercial tariff category. The decision was later notified by the federal government through SRO 1168(I)/2022.

The decision sparked discontent among cold storage operators, who argued that the commercial tariff classification increased operational costs. 

Many consumers lodged complaints with NEPRA, prompting the authority to hold a public hearing on June 6, 2023. Representatives from DISCOs, the All Pakistan Cold Storage Association, and other stakeholders participated in the hearing.

Subsequently, several industrial consumers challenged NEPRA’s decision in the Lahore High Court (LHC), which ruled in February 2023 that NEPRA must provide an opportunity for affected consumers to be heard before altering tariff classifications. 

NEPRA and DISCOs appealed the decision in the Supreme Court, which in October 2023 directed NEPRA to make an independent determination without being influenced by the LHC’s judgment.

In its latest review, NEPRA consulted the Ministry of Energy (Power Division) and the Finance Division. Both entities raised concerns about the financial implications of changing the tariff category for cold storage. 

The Finance Division warned that such a move could impact the Circular Debt Management Plan (CDMP) and potentially increase the government’s subsidy burden.

The Power Division cautioned that allowing cold storage to switch to the industrial tariff could set a precedent, leading other commercial establishments to demand similar treatment, resulting in further litigation and increased financial pressure on other consumer categories.

NEPRA highlighted that cold storages primarily serve as intermediaries, preserving perishable goods such as fruits, vegetables, meat, and dairy products for grocery chains, restaurants, and retailers. Since these facilities do not engage in manufacturing, value addition, or industrial transformation, they align more closely with the commercial tariff’s criteria.

NEPRA stated that cold storage does not meet the requirements for industrial tariff classification. Consequently, all DISCOs, including K-Electric, are instructed to treat cold storage as commercial consumers under the tariff conditions outlined in 2022.