Contributed By RIAA Barker Gillette
Electricity Sector Regulatory Regime
The principal law regulating the power industry of Pakistan is the Regulation of Generation, Transmission and Distribution of Electric Power Act 1997, as amended from time to time (the “NEPRA Act”). The National Electric Power Regulatory Authority (NEPRA) was established pursuant to the NEPRA Act as an independent regulator of the power sector. On 2 May 2018, the Regulation of Generation, Transmission and Distribution of Electric Power Act (Amendment) Act 2018 (the “2018 Amendment Act”) was enacted. The 2018 Amendment Act significantly amended the NEPRA Act and reformed the electricity market by introducing provisions to foster greater competition.
NEPRA’s main functions include the issuance of licences for undertaking specified regulated activities (ie, generation, transmission, distribution and/or supply business, and construction and operation of related facilities) and the determination of tariffs for the sale of electric power.
Licensees include:
Through the 2018 Amendment Act, Section 14(B) was incorporated in the NEPRA Act to inter alia regulate the business of generation in Pakistan under a licensing regime, subject to subsection (5) of Section 14(B) thereof. Under this subsection, the federal government – in consultation with NEPRA – was entitled to plan the gradual phase-out of licences for different types of power generation companies. This plan for phasing out licences had to be completed within five years from the enactment of the 2018 Amendment Act (ie, by 30 April 2023). Now that the planned period for the gradual cessation of licences has ended, any power generation company can set up and operate a generation facility without needing a licence. Nonetheless, any company that wants to set up a generation facility must still comply with technical standards that relate to connecting their facility to the power grid and must obtain NEPRA’s concurrence in a manner to be specified in the regulations. As yet, however, NEPRA has not provided any clarity regarding the terms and conditions that an applicant must meet. Notwithstanding the foregoing, NEPRA is of the view that the entities that were issued generation licences prior to 30 April 2023 shall continue to be regulated under the previous regime.
NEPRA Laws
Pursuant to the NEPRA Act, NEPRA has enacted and approved the following key rules, regulations and binding documents (the “NEPRA Laws”):
The foregoing list is not exhaustive and is in no particular order.
Council of Common Interests
The Council of Commons Interests (CCI) is the highest policy-making body of the federation. The CCI was established under Article 153 of the Constitution of Pakistan and consists of:
The functions of CCI include formulating and regulating policies in relation to electricity matters and exercising supervision and control over related institutions.
Facilitative regime
In order to facilitate power projects being developed pursuant to government power policy, the federal government has established the following statutory bodies:
At the provincial level, similar bodies/departments for the development of power projects pursuant to provincial government power policies have been set up in the following provinces:
In the case of the state of Azad Jammu and Kashmir (AJK), the AJK Power Development Organisation (AJK-PDO) has been established to facilitate power projects in the AJK.
Ownership of Licensees
Generation companies
There are both state-owned and privately owned generation companies operating in Pakistan. Owing to recent government policies, the number of grid-based independent power producers (IPPs) has grown greatly during the past two decades.
In the local market, the term “IPP” refers almost exclusively to privately owned power projects developed pursuant to a government-issued power policy that sell their power exclusively to the government’s purchasing entity (ie, CPPAG).
Transmission companies
The primary transmission licensee is the state-owned NTDC, which owns and manages the national grid. The provinces of Pakistan have recently begun to set up their own transmission companies (see 1.2 Principal State-Owned or Investor-Owned Entities (Transmission Entities)).
There are also a few privately owned transmission companies holding special purpose licences – for example, Fatima Transmission Company Limited and Pak Matiari Lahore Transmission Company (Private) Limited.
Distribution and supply companies
Distribution companies are predominantly owned by the government. Exceptions include K-Electric Limited (a century-old public utility company that was privatised in 2005) and a few companies that were set up as private distribution businesses.
Generation Entities
State-owned
The Water and Power Development Authority (WAPDA), a statutory body, owns and operates a number of electric power projects for the government – the majority of which are hydropower-based. WAPDA also continues to develop further hydropower projects, including the Dasu hydropower project and the Keyal Khwar hydropower project.
Previously, WAPDA was the sole electric power utility of Pakistan. In the 1990s and 2000s, WAPDA was restructured to spin off:
Recently, the government has set up four large re-gasified liquefied natural gas (RLNG)-based power generation projects through three government-owned companies – namely, the National Power Parks Management Company (Private) Limited (which set up the Balloki and Haveli Bahadur Shah projects), Quaid-e-Azam Thermal Power (Private) Limited, and Punjab Thermal Power (Private) Limited. Additionally, a number of nuclear power plants are owned and operated by the Pakistan Atomic Energy Commission.
Government-owned generation companies are often referred to as “GENCOs” in Pakistan.
Private
The private sector has established a number of fossil-fuel power projects (residual furnace oil (RFO), high speed diesel (HSD), pipeline quality gas, reservoir-based gas, RLNG, imported coal, indigenous coal and cogeneration) and renewable energy projects (wind, solar and biomass/bagasse) pursuant to various government power policies. Some of the largest foreign investors in the private power sector include China Three Gorges, Power China, Hydrochina, China Gezhouba, Engie (French), K-Water (Korean), whereas the largest local investors include Engro, Hubco and Yunus Brothers.
K-Electric Limited also owns and maintains a portfolio of power projects, including the Bin Qasim Power Complex, the Korangi Power Station, the Site Gas Power Station and the Korangi Town Power Station.
Additionally, a number of captive private power projects have also been set up by the owners of factories and other commercial establishments to meet their electric power requirements.
Transmission Entities
State-owned
The national grid of Pakistan is owned and managed by the NTDC, a state-owned company. The NTDC enjoys the exclusive right to provide transmission services within most of Pakistan.
The NPCC, the system operator responsible for the control of supply of electric power generated by all power producers connected to the national grid, is a part of the NTDC.
The provincial grid companies (PGCs) are owned by the respective provincial governments and include:
Private
Some privately owned transmission companies are:
These companies have special purpose transmission licences that were issued pursuant to Section 19 of the NEPRA Act. These licences only permit the licensee to engage in the construction, ownership, maintenance and operation of specified transmission facilities.
Distribution Entities
State-owned
The majority of DISCOs in Pakistan are state-owned entities with the right to carry out distribution activities in their respective service territories. As these state-owned DISCOs were formed after the restructuring of WAPDA, they are referred to as “ex-WAPDA DISCOs”. They include the following companies:
Private
The following is a non-exhaustive list of privately owned distribution companies:
There are no notable restrictions on the injection of foreign investment into the power sector. On the contrary, the government encourages foreign investment by extending various protections and fiscal and financial incentives to investors. Some of these protections are provided in the law, whereas many are promised contractually via concession agreements signed between the investor(s) and the government. In the local power sector, these agreements are referred to as “implementation agreements”.
These protections and incentives include:
If any investment (whether foreign or local) is to be made in a project being developed pursuant to a government policy – and thus is eligible for receipt of the above-mentioned sovereign guarantee – then the relevant facilitative agency of the government will review the financial and technical strength of the investor before approving their investment in the project.
Typically, the permitted debt-to-equity ratio is from 80:20 to 70:30. Any equity in excess of the permitted ratio will be treated as debt by NEPRA when determining the tariff.
Further, when determining the tariff, NEPRA will take into account:
Repatriation of foreign investment is subject to the exemption/approval of the State Bank of Pakistan (SBP), which grants the approval in accordance with the prevailing foreign exchange policy.
NEPRA imposes restrictions and conditions on various transactions by licensees, including amalgamations and mergers by licensees and the sale of power industry assets by licensees.
The Generation Licensing Rules impose a number of restrictions and conditions on the generation and distribution licences issued by NEPRA, including restrictions in respect of:
Transactions that involve the foregoing require the prior approval of NEPRA, which will take into account the promotion of competition in the electric power industry as a whole and any change in the control or management of the licensee likely to result from the approval (if granted).
Additionally, pre-merger approval is also required from the Competition Commission of Pakistan (CCP), subject to the transaction meeting the thresholds imposed by the applicable provisions of competition law.
Further, the implementation agreement entered into between IPPs and the government provides for a contractual “lock-in” period, during which the shares of the project company cannot be transferred without the approval of the government.
There are a number of precedents in which the relevant government agency has approved the transfer of project company ownership/control, including:
In addition to being the national grid company, the NTDC is also responsible for the development of power generation and transmission in Pakistan. In this role, the NTDC has prepared the Indicative Generation Capacity Expansion Plan 2021–30 (IGCEP), which sets out the generation expansion plan for the decade. Based upon the IGCEP, the NTDC is then expected to formulate its Transmission System Expansion Plan.
As previously mentioned, the NPCC is responsible for the control and dispatch of electric power to meet the demand of the national grid (see 1.2 Principal State-Owned or Investor-Owned Entities).
In addition to the foregoing, the investment and expansion plans of distribution licensees and transmission licensees – and their performance and safety in light thereof – are reviewed and approved by NEPRA annually, along with the revenue requirements.
Aside from the NPCC, the following stakeholders also play a role in planning:
The foregoing list is not exhaustive.
In 2018, the NEPRA Act was amended to – inter alia – pave the way for a deregulated, competitive market, referred to as the Competitive Trading Bilateral Contract Market (CTBCM) model.
In addition to the generation, transmission and distribution licences already provided by the original law, the 2018 Amendment Act introduced new licences for:
The 2018 Amendment Act to the NEPRA Act also:
The foregoing list is not exhaustive.
Protection of Existing Exclusivity Rights
Historically, the NEPRA Act has granted exclusivity to DISCOs in their respective service territories. Section 22(1) of the NEPRA Act granted case-by-case second-tier supply authorisations to generation companies and DISCOs that want to directly supply consumers within the service territories of other DISCOs.
However, Section 22(1) was subject to a sunset clause that limited its effectiveness for a period of 15 years from the commencement of the NEPRA Act (ie, until the year 2012). In addition to removing the exclusivity right of DISCOs in relation to their respective service territories, the 2018 Amendment Act removed Section 22(1)’s sunset clause so that NEPRA could continue to issue second-tier supply authorisations.
Notably, as well as granting second-tier supply authorisations to generation companies prior to 2012, NEPRA also continued to grant them from 2012 (ie, when Section 22(1) was no longer effective) up to 2018 (ie, the revival of Section 22(1)) and beyond. It is worth mentioning, however, that NEPRA phased out the second-tier supply authorisations following the introduction of the supply licence via the 2018 Amendment Act. The NEPRA Licensing (Electric Power Supplier) Regulations 2022 require that a year after notification of the same (which was 28 March 2022), all generation companies with a second-tier supply authorisation must apply for a supply licence to sell power to consumers. Therefore, the sale of power to consumers by generation companies that was once came under the second-tier authorisation of the generation licence is now regulated under the supply licence regime.
The Islamabad High Court, through its decision on writ petitions filed by certain DISCOs against NEPRA, decided that:
As a consequence of the High Court’s decision:
New National Electricity Policy 2021
Pursuant to Section 14(A) of the NEPRA Act, the federal government is required to prescribe an NE Policy, with the approval of the CCI, that encompasses:
In 2021, the federal government introduced the National Electricity Policy 2021 (the “2021 NE Policy”). Prior to the 2021 NE Policy, the federal government had formulated the Power Generation Policy 2015 (the “2015 Policy”), which set out specific incentives and protections for investors developing power projects with government support. The 2021 NE Policy, which is broader in scope but less specific about the incentives and protections offered, did not replace the 2015 Policy – rather, the 2021 NE Policy supplements the older policy.
The 2021 NE Policy signals the federal government’s growing focus on the following matters, among others, in respect of the electricity sector:
The 2021 NE Policy also provides that future procurement of electricity by the NTDC will be in accordance with the IGCEP and its interconnectivity with the grid will be based on the Transmission System Enhancement Plan (TSEP). The IGCEP is a system prepared by the NTDC under which it acquires power from different generation plants based on an optimised tariff as calculated by the system. The TSEP is to be developed in order to connect new generation plants to the grid as required by the IGCEP.
New Alternative and Renewable Energy Policy 2019
The Alternative and Renewable Energy Policy 2019 (the “2019 ARE Policy”) places a greater emphasis than the previous renewable energy policy (namely, the Policy for Development of Renewable Energy for Power Generation 2006) on:
The 2019 ARE Policy extends to projects that are based on:
The foregoing is not an exhaustive list.
Transmission Line Policy 2015
Recognising the need to augment the national transmission network, the federal government published the Transmission Line Policy 2015 (the “Transmission Policy”). So far, the Matiari-Lahore transmission line is the only project has been developed under the Transmission Policy (see 5.2 Obtaining Approvals for the Construction and Operation of Transmission Lines and Associated Facilities for further details).
Projects Under Older Policies
Projects developed under older policies (eg, the 2015 Policy and the Policy for Power Generation Projects Year 2002) continue to enjoy the concessions and protections granted to them under such policies.
High-Risk High-Reward Market
Pakistan is a challenging country to invest in – for reasons ranging from security risks and circular debt to bureaucratic red tape. As such, the government offers some of the highest return-on-equity rates in the global market – up to 14–17% – to attract investment in the local power sector. The extraordinary return offered by the government has attracted a significant amount of local and foreign investment within the power sector and continues to do so.
Circular Debt
As per the NEPRA State of Industry Report 2022, the circular debt in the power sector stood at PKR2,252 million in June 2022 and has continued to increase significantly since then. According to NEPRA, the main causes of the increase include:
Economic Meltdown
Dwindling foreign reserves, global inflationary pressures, a weakening rupee, political instability, and globally high fuel prices of imported fuel such as oil, RLNG and coal have led to a very precarious economic situation for Pakistan.
Lack of Planning/Co-ordination
There is a chronic lack of planning and co-ordination within the government when it comes to the power sector.
Provincial governments exercise their legal power to issue letters of intent for projects without consulting the federal government, which leads to unplanned generation capacity additions. The issuance of the IGCEP has been delayed and, in lieu of a systematic onboarding of generation plants based on optimised tariffs, the NTDC has been inducting new projects into the pipeline on an overburdened national transmission system.
Dependence on Imported Fuels
Pakistan has failed to fully utilise its indigenous energy resources – specifically, its hydro resources, renewable sources such as wind, solar and bagasse, and local coal. Instead, the country has relied on imported fuels (HSD, RFO, imported coal and RLNG) to meet its energy requirements, which have been expensive and a drain on the national foreign exchange reserves.
Moratorium on Coal
As a result of climate change concerns, international financial institutions are now reconsidering their support for coal power. In some cases, these institutions have even withdrawn their financing commitments for in-development coal power projects.
Unwillingness of Distribution Companies to Enable Wheeling
Current examples of electricity wheeling are few and far in between in Pakistan. Where wheeling is being done, the arrangement is at a nascent stage and localised.
DISCOs are unwilling to enable wheeling on their networks as a result of the following factors, among others.
The consumers lost to wheeling are often reliable, high-revenue customers that form the backbone of Pakistan’s industries (eg, factories, commercial and industrial establishments). This means the DISCOs’ concerns are juxtaposed against the developmental considerations of those industries that contribute significantly towards the economic growth of the country.
Ageing Transmission and Distribution Networks
Unfortunately, owing to neglect and lack of investment, the transmission and distribution networks of Pakistan have aged poorly. This has exacerbated technical and non-technical losses, which go on to feed the problem of circular debt. This means these networks are ripe targets for foreign investment, subject to a suitable government policy being issued to incentivise such investment.
Bureaucratic Hurdles
Owing to institutional inertia and other factors, Pakistan suffers from chronic delay in government decision-making. This, along with excessive red tape and an antiquated judicial system that leads to inordinate delays in regulatory adjudication and dispute resolution, frustrates projects at all stages of development and operation.
The wholesale electricity market is entirely regulated at present. NEPRA determines the tariffs for all sales of electricity, including sales made by generation companies to distribution companies.
NEPRA has begun the process of deregulating the market in order to increase competition. In preparation for this deregulation, an elaborate mechanism of gradual transition to a competitive market – known as the CTBCM – has been developed. To enable the development of the CTBCM, the NEPRA Act was substantially amended in 2018, introducing the new licences discussed in 1.6. Recent Changes in Law or Regulation.
NEPRA has developed a legal framework to enable the import of electric power from outside of Pakistan, including from the state of Azad Jammu and Kashmir.
The NEPRA (Import of Electric Power) Regulations 2017 enable licensees to negotiate and contract with power projects based outside NEPRA’s jurisdiction for the import of electric power. The NEPRA (Import of Electric Power) Regulations 2017 have recently been replaced with the NEPRA (Electric Power Procurement) Regulations 2022.
Currently, imports under these regulations are being made from the state of Azad Jammu and Kashmir and from Iran. The pricing of these imports is negotiated between the generator/exporter and the power purchaser (usually CPPAG or, for older projects, the NTDC) and subsequently approved by NEPRA.
Pakistan presently does not export electric power.
As per NEPRA’s State of Industry Report 2022, the total installed generation capacity of Pakistan was 43,775 MW. This national supply mix consisted of:
NEPRA has a broad mandate to ensure competition in the national market.
Additionally, the CCP has the mandate to ensure competition in all markets in Pakistan. In the case of mergers, transactions require pre-merger clearance by the CCP if they exceed the following thresholds:
In practice, there is no state entity that proactively regulates market concentrations limits in the energy sector.
Pakistan does not currently have a competitive energy market.
Federal and Provincial Environmental Protection Agencies
The regulation of environmental matters, including the environmental impact of power projects, is the mandate of the federal Environmental Protection Agency (EPA) and the provincial EPAs.
Following the 18th Amendment to the Constitution of Pakistan in 1973, every province established a provincial EPA through a provincial legislative instrument. The federal EPA’s jurisdiction is limited to the area of Islamabad Capital Territory. A project will be subject to the rules and regulations of the provincial EPA when operating therein.
In order to obtain the approval of an EPA, a project may be required to carry out an Environmental Impact Assessment or an Initial Environment Examination, depending on the requirements of the respective EPA.
Pakistan has also passed the Pakistan Climate Change Act 2017. The purpose of this act is to ensure that Pakistan meets its obligations under the international agreements and conventions regarding climate change to which Pakistan is a signatory. It further mandates that Pakistan must adopt measures to combat climate change through the establishment of the Pakistan Climate Change Authority. The functions of the Pakistan Climate Change Authority include:
This list is non-exhaustive.
Carbon Credits
Pakistan is registered as a host country with the UNFCCC. A number of renewable energy projects have generated and sold carbon credits.
There is no policy in Pakistan for early retirement of carbon-based generation.
Pakistan only recently established a number of local coal power projects so as to reduce its reliance on imported fuel by exploiting the country’s Thar coal reserves.
That said, the useful life of all projects is reviewed at the time of issuance of licences and the term of each licence is designed to be commensurate with the useful life of the relevant project.
Growth of Renewable Energy Sources
In order to reduce reliance on carbon-based generation, the federal government has aimed to increase power generation from renewable sources to more than 50% of the total power generation energy mix, as per the Pakistan Energy Outlook Report 2021–30 released by the Ministry of Planning, Development and Special Initiatives. The provincial governments are also drafting policies that encourage off-grid solutions such as rooftop solar units.
Alternative Energy Development Board and Renewable Policies
The Federal Government has set up the Alternative Energy Development Board (AEDB) to facilitate the development of alternative energy power projects, including solar, wind, small hydro and biomass projects.
Policies facilitating the development of renewable energy projects include:
Selection of project developers by the AEDB has not been done on competitive basis so far, but there are plans to undertake competitive bidding for future projects.
Off-Grid
The Provincial governments, in particular the Government of Sindh, are beginning to explore the viability of off-grid energy solutions that do not require expansion of existing networks to supply electric power to remote areas. These include mini grids powered by solar energy that supply electric power to villages independently of the national grid.
Net-Metering
NEPRA promulgated the NEPRA (Alternative & Renewable Energy) Distributed Generation and Net Metering Regulations 2015 to establish a framework for the regulation of Distributed Generation by using alternative and renewable energy and net metering by Distributed Generators (ie, a domestic, commercial or industrial consumer who owns and/or operates the relevant renewable energy small-scale facility and is licensed by the Authority under the Regulations).
Mechanisms for Providing Incentives
The mechanisms for providing incentives to project companies include:
The foregoing list is not exhaustive.
The construction and operation of generation facilities is regulated pursuant to:
NEPRA Laws
Pursuant to the NEPRA Act and the Generation Licensing Rules, no person can construct or operate a power project unless they have a licence to do so from NEPRA. Once they hold a licence, they must construct the power project as per the approved parameters.
The 2018 Amendment Act, however, has stated that the requirement for a generation licence shall cease as of five years from the promulgation of the amendment act. A generation company must only obtain NEPRA’s “concurrence” and ensure that they comply with the technical standards related to grid connectivity (see 1.1 Law Governing the Structure and Ownership of the Power Industry).
Pakistan Engineering Council
The Pakistan Engineering Council (PEC) is responsible for regulating engineers, constructors and operators working in Pakistan. Such persons must be issued the requisite licences from the PEC before they can undertake construction and operation works.
The following key consents, inter alia, are required for the construction and operation of generation facilities:
Consents required as part of the implementation agreement include:
The terms and conditions under which a generation facility can be set up are provided in the generation licence of each generation licensee (see 1.1 Law Governing the Structure and Ownership of the Power Industry). The typical terms and conditions include:
Power project developers themselves are not granted the right of eminent domain. However, the government is empowered under the Land Acquisition Act 1894 (the “Acquisition Act”) to assist developers in acquiring land for public purposes, which includes electric power generation for sale to the government (ie, CPPAG). Through the Acquisition Act, a project will ask the government to acquire the land from private citizens. The government will do so and require that the project company deposit compensation with the government, which is then disbursed to the landowners.
If the project company wishes to acquire land from the government, it may do so under the Colonization and Disposal of Government Lands Act 1912 through the issuance of Statement of Conditions that specifies the purpose and terms applicable to such state lands.
In other cases, especially where the land is already owned – or has been acquired – by the government or a third party, the project company may enter into a lease for the project land.
The term of each generation licence is designed to be commensurate with the useful life of the project. Nevertheless, some projects opt for early decommissioning or changing their fuel and/or upgrading their units in order to extend the useful life of the project.
Under the Generation Licensing Rules, decommissioning of a plant without obtaining NEPRA approval will result in a breach of the term of the licence. This may lead to NEPRA penalising the licensee by revoking/suspending the licence, appointing an administrator for the generation business, or imposing a fine.
There have been instances where NEPRA has allowed decommissioning on application of an IPP. NEPRA usually requires that the IPP apply for cancellation of its licence (if the license is still valid). Where only certain units are to be decommissioned then the licence may need to be modified. NEPRA then allows decommissioning if there is no contractual obligation under the implementation agreement for transfer of the facility to the federal government.
At the end of the term of the concession agreements for most hydropower projects, the relevant government has the option of having the project transferred to it for a nominal sum. To date, none of the power projects whose concession agreement terms have expired have been transferred to government.
The construction and operation of transmission facilities is regulated pursuant to:
NEPRA Laws
Pursuant to the NEPRA Act, no person can construct or operate transmission facilities unless they have a licence to do so from NEPRA. Once they hold a licence, they must construct the transmission facilities according to the approved parameters.
Grid Code
The Grid Code is a regulatory code formulated by the NTDC (as the national grid company) and approved by NEPRA. All distribution and transmission companies (including the NTDC) are required to comply with the Grid Code in the development and operation of their facilities.
The following are the key consents required for the construction and operation of transmission facilities:
The policy currently in vogue for the development and operation of transmission facilities is the Transmission Line Policy 2015. As noted in 1.7 Announcements Regarding New Policies, only one transmission facility has been developed under this policy so far – namely, the Matiari-Lahore 600kV high-voltage direct current transmission line developed by the Pak Matiari Lahore Transmission Line Company (Private) Limited. The line is intended to transmit the electric power generated by the local coal-based power projects being developed in Thar and Sindh, which are located in the south of Pakistan, towards the central and northern parts of the country.
The majority of the terms and conditions for the operation of transmission facilities are set out in the respective licence of each transmission licensee. The typical terms and conditions include:
Rights over the land required for the construction and operation of transmission facilities are acquired in the following ways:
The NTDC enjoys the exclusive right to provide transmission services within its service territory.
Although K-Electric Limited also enjoys the exclusive right to provide transmission services within its service territory, this right is linked to its exclusivity under its distribution licence (see 6.5 Monopoly Rights for Electricity Distribution Entities for more information).
However, in order to foster greater competition, the 2018 Amendment Act has however ended the mandatory requirement for issuance of exclusive licences. Accordingly, once licences granted prior to the amendment have expired, it is expected that future licences will no longer grant exclusivity to transmission licensees.
The tariff for transmission services is determined by NEPRA pursuant to the NEPRA Act and the Tariff Rules.
NEPRA determines the tariff for transmission services is determined by taking into account the following:
Pursuant to the terms of the transmission licences (see Articles 10, 12 and 13 of the NTDC’s licence and Articles 11, 13 and 14 of K-Electric Limited’s licence), licensees are required provide transmission services on open-access and non-discriminatory basis.
As the licensing authority, NEPRA is responsible for policing the licensees’ compliance with these obligations.
The construction and operation of distribution facilities is regulated pursuant to:
NEPRA Laws
No person can construct or operate a distribution project unless they have a licence to do so from NEPRA. Licence holders must construct the distribution facilities as per the approved parameters.
Key Approvals for Construction and Operation of Distribution Facilities
The following are the key consents required for the construction and operation of distribution facilities:
The terms and conditions for construction and operation of distribution facilities are set out in the distribution licence issued by NEPRA (or are implied therein by the Distribution Licensing Rules).
These terms and conditions include:
Rights over the land required for construction and operation of distribution facilities are acquired in the same way as the equivalent process described in 5.4 Eminent Domain, Condemnation and Expropriation Rights for transmission companies.
Historically, by virtue of the NEPRA Act and their licences, distribution companies have enjoyed the exclusive right to provide distribution services within their specified service territories.
Since the 2018 Amendment Act to the NEPRA Act, however, the provision for exclusivity has been removed. Although licensees that have already been granted exclusivity will continue to enjoy it until the expiry of those licences, they will not be granted exclusivity thereafter.
The principal laws governing the provision of distribution service, regulation of distribution charges and terms of service include:
The following is a non-exhaustive list of details that NEPRA takes into consideration when determining a distribution tariff:
Pursuant to Section 31(2) of the NEPRA Act, the regulatory principles that NEPRA must take into account when determining a distribution tariff include:
There are different tariffs for different types of consumers. The broad categories are:
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