Nepra
ISLAMABAD: The National Electric Power Regulatory Authority (NEPRA) on Tuesday strongly criticized power Distribution Companies (Discos) for seeking significant hikes in security deposit rates, terming it an unfair attempt to shift their inefficiencies onto consumers. NEPRA announced that it would not make a determination on the matter until a thorough audit of existing deposits was completed.
During a heated hearing, NEPRA members, including Rafique Ahmad Shaikh, Mathar Niaz Rana, Amina Ahmed, and Maqsood Anwar Khan, questioned the justification behind the proposed increase.
The Discos’ team, led by Irfan Butt from Gepco, failed to provide a convincing argument, leading NEPRA to reject their request. The regulator noted that the petition was weak and lacked merit, a pattern seen in previous hearings.
Interestingly, no representative from the Power Division—who had directed the Discos to file the petition—was present at the hearing. Their absence was widely seen as an attempt to avoid criticism from NEPRA.
NEPRA also directed K-Electric and Sukkur Electric Supply Company (LESCO) to submit similar petitions, as any decision on security deposits would be implemented nationwide under a uniform tariff.
However, representatives from various industry groups, including Arif Bilwani, Tanveer Barry, Imran Shahid from JI, Asim Riaz of APTMA, Aamir Sheikh, and members of the Lahore Chamber of Commerce and Industry, opposed the proposed hike. They argued that Discos’ financial mismanagement should not be passed on to consumers.
A major unresolved question was whether the increased security deposits would also apply to mosques and military installations. NEPRA and Discos failed to provide a clear answer on this. Consumer associations had already rejected the proposal, asserting that the hike was excessive and unfair.
The Discos justified the hike by citing the need to cover consumer defaults, with existing consumers also affected. The additional payments would be collected in installments. However, NEPRA’s tariff member, Mathar Niaz Rana, questioned the authenticity of the current deposit figures, noting that NEPRA’s audit team had already discovered discrepancies in three Discos’ records.
Another concern raised was that a significant increase in security deposits could drive more consumers toward solar energy solutions, leading to reduced demand for electricity from Discos. Gepco’s Irfan Butt acknowledged that such a scenario could further impact revenues.
Tanveer Barry, representing the Karachi Chamber of Commerce and Industry (KCCI), highlighted the steep rise in security deposits—from Rs 2,010 to Rs 54,783—and its devastating effect on industries. He warned that such an increase would force industries to switch to solar power, accelerating the decline of Discos’ customer base.
According to NEPRA’s 2024 State of Industry Report, K-Electric’s sanctioned load is 13,031 MW, while its peak demand only reaches 3,500 MW. Similarly, Discos have a combined sanctioned load of 97,900 MW but a transmission capacity of just over 23,000 MW. Barry argued that the proposed rates were unjustified for existing consumers. He further called the hike “exorbitant and unreasonable,” as it was based on 1% of the FBR-assessed value.
Aamir Sheikh pointed out that the security deposit increase would place a massive burden on large consumers, particularly in the face of ongoing economic challenges and industrial decline.
He estimated that industries would have to pay an additional Rs 25-30 crores in security deposits—an impossible demand under current conditions. Instead of allocating capital to such payments, he suggested that industries invest in growth and job creation.
Sheikh also noted that under independent B3 feeders, industries had already paid for and installed necessary infrastructure, including panels, transmission lines, and high-tension installations. Since this equipment is now under the Discos’ control, additional security deposits should not be required. He added that the security deposits paid decades ago had grown exponentially due to interest, making further increases unjustified.
Arif Bilwani raised concerns that Discos had been inflating their sanctioned loads beyond actual capacity, leading to excessive security deposit collections.
Citing the NEPRA Annual State of Industry Report 2024, he pointed out that the total sanctioned load of the 10 Discos (excluding K-Electric) is 97,899 MW, while their peak demand in 2023-24 was only 27,385 MW.
For K-Electric, the sanctioned load is 13,032 MW, yet peak demand reached only 3,568 MW. This discrepancy, Bilwani argued, has allowed Discos to demand security deposits for electricity loads they are incapable of delivering.
With strong opposition from industry stakeholders and unresolved discrepancies in deposit calculations, NEPRA’s final decision on the security deposit hike remains on hold pending further audits and review.
