New Amendments Aim to Legalize Revenue-Based Load Shedding in Pakistan

Revenue-Based Load Shedding

The Pakistani government is set to propose significant amendments to the Nepra Act and the Performance Standards to formalize and legalize a new approach to electricity load shedding, known as revenue-based load shedding.

This move aims to address the financial challenges faced by the power sector by linking load shedding practices to the Aggregate Technical and Commercial (AT&C) losses experienced by distribution companies.

According to the Power Division, the country’s power sector is grappling with escalating circular debt, which poses a severe threat to its financial stability and overall viability. Key factors contributing to the mounting circular debt include high line losses, inadequate recovery rates, and widespread electricity theft.

These issues have forced distribution companies to implement revenue-based load shedding in areas with significant line losses. Additionally, the sharp rise in power prices for the central pool has made it financially imprudent to purchase expensive electricity for distribution to consumers.

To tackle these economic pressures, the Power Division argues that a structured approach to load shedding is essential. This proposed approach aims to integrate economic and revenue-based considerations into the legal framework governing load shedding practices.

The current discussions around economic load-shedding policies have highlighted the need to incorporate these considerations into the legal structure, ensuring that load shedding due to economic constraints is formally recognized and regulated.

In response to these challenges, a committee has been established by the Power Division, comprising members from various bodies, including the Private Power and Infrastructure Board (PPIB), Central Power Purchasing Agency (CPPA), Law Division, Nepra, and independent legal and regulatory experts.

This committee has been tasked with reviewing existing legal provisions, including Section 34 of the Nepra Act, and the Performance Standards Rules of 2005. The committee’s comprehensive review also included an examination of judgments from superior courts, the National Electricity Policy 2021, strategic directives from the National Electricity Plan, and Nepra’s advisory to Distribution Companies from February 2022.

The committee completed its detailed report on July 31, 2024, proposing amendments to both the Nepra Act and the Performance Standards (Distribution) Rules 2005.

These proposed amendments include the addition of a new definition for load shedding in Section 2, Clause VII-A of the Nepra Act, which will cover load shedding due to technical, commercial, and economic factors as approved by the Authority.

Furthermore, the committee has recommended changes to sub-section V of Section 34 of the Nepra Act. This amendment would allow the federal government to issue binding policy guidelines for load shedding necessitated by economic constraints.

These guidelines would ensure that the principles of equality and non-discrimination among different consumer classes are maintained.

Following endorsement from the Power Division, the proposed amendments are now awaiting review by the Cabinet Committee on Disposal of Legislative Cases (CCLC).

Upon approval by the CCLC and the Federal Cabinet, the amendments will be presented to the National Assembly and Senate for final approval.

Nepra and the National Transmission and Dispatch Company (NTDC) have also provided their perspectives on the proposed changes, particularly concerning the implementation of revenue-based load shedding.

The outcome of these legislative changes will significantly impact how load shedding is managed in Pakistan, aiming to create a more structured and economically viable approach to electricity distribution.