NEPRA rejects MEPCO review pleas, upholds five-year tariff framework

ISLAMABAD: The National Electric Power Regulatory Authority has rejected review motions filed by Multan Electric Power Company against its distribution and supply tariff determinations under the Multi-Year Tariff regime for fiscal years 2025-26 to 2029-30.

The decision, issued on June 8, 2026, upholds the tariff framework determined by NEPRA on January 7 and notified by the federal government through a statutory regulatory order on January 13.

MEPCO had challenged several elements of the determinations, including investment approvals for FY2025-26 and FY2026-27, operation and maintenance expense allowances and the continued application of the X-Factor efficiency mechanism.

The company also claimed there was a mismatch between its revenue requirements and the investment and transmission and distribution loss targets approved by the regulator.

MEPCO said it had requested Rs51.365 billion for investment during the first two years of the control period, against which NEPRA provisionally allowed Rs18.912 billion.

The company argued that the approved amount was insufficient for network expansion, modernisation and operational improvements, given the size of its system and consumer base.

MEPCO informed the regulator that it had submitted a revised Distribution Investment Plan of Rs119.022 billion for the five-year tariff period.

The plan covers system strengthening, rehabilitation of high- and low-tension networks, Advanced Metering Infrastructure, outage management systems, enterprise resource planning platforms, data centres, geographical information system mapping, smart metering and anti-theft measures.

Proposed investments included Rs41.7 billion for replacing defective meters, Rs11.96 billion for advanced outage management systems, Rs7.07 billion for expanding Advanced Metering Infrastructure and Rs3.77 billion for establishing a centralised data centre.

MEPCO said several projects were linked to reform programmes supported by the World Bank and Asian Development Bank, warning that delays could create financial and contractual risks.

The company also maintained that it had received lower investment approvals than some other distribution companies despite serving around 8.8 million consumers and reporting stronger operational performance.

According to MEPCO, transmission and distribution losses fell from 15.2% to 13.3% during FY2024-25, saving around 358 gigawatt-hours and generating an estimated financial benefit of Rs9.8 billion.

The company said its recovery rate improved from 98.62% to 100.51%, producing an additional benefit of about Rs11.8 billion.

MEPCO estimated the combined financial gains from improved losses and recoveries at nearly Rs21.6 billion during the year.

NEPRA, however, said the investment amounts approved in the tariff determinations were provisional and would be finalised separately during proceedings on MEPCO’s investment plan.

Any changes resulting from those proceedings would subsequently be incorporated into the company’s tariffs, the regulator added.

On operation and maintenance expenses, MEPCO challenged the allowances for repairs and maintenance, travelling and vehicle maintenance, arguing that they did not adequately account for inflation.

NEPRA said MEPCO’s objections largely resulted from a misunderstanding of the tariff-setting methodology.

The regulator explained that costs had first been assessed collectively for the company’s distribution and supply functions before being allocated between the two businesses.

NEPRA approved Rs53.501 billion in operation and maintenance expenses for FY2025-26 and a provisional Rs57.639 billion for FY2026-27, representing an overall increase of about 8%.

MEPCO also requested the removal of the X-Factor efficiency mechanism during the tariff control period.

NEPRA rejected the request, saying the efficiency benchmark applied uniformly across the power sector and had also formed part of MEPCO’s previous Multi-Year Tariff framework.

The authority also dismissed MEPCO’s objection to revenue requirements being calculated on a calendar-year basis while investment and loss targets were set on a financial-year basis.

It noted that MEPCO had originally requested the rebasing of consumer-end tariffs to a calendar-year framework.

NEPRA nevertheless said it would hold a separate session with all distribution companies to explain the tariff assessment methodology and future data requirements.

The authority concluded that MEPCO had provided no grounds warranting a review of the tariff determinations and therefore declined both motions.

The decision has been forwarded to the federal government for publication in the official Gazette under Section 31(7) of the NEPRA Act.