NEPRA puts off security deposit hike

ISLAMABAD:

The National Electric Power Regulatory Authority (Nepra) announced on Tuesday that it would withhold a decision on the proposed hike in security deposit rates until the completion of a thorough audit of the deposits taken by power distribution companies (DISCOs).

At a public hearing, DISCOs faced the wrath of the power-sector regulator and interveners over the proposed substantial increase in security deposit rates.

In a tense environment, Nepra members – Rafique Ahmad Shaikh, Mathar Niaz Rana, Amina Ahmed and Maqsood Anwar Khan – expressed dissatisfaction with the case presented by the representatives of DISCOs, led by Irfan Butt of Gujranwala Electric Power Company (Gepco).

According to Nepra, the case of DISCOs appeared weak as they repeated the same arguments as given in previous discussions. The proposed hike in security deposit rates was perceived as an attempt to offload the financial burden caused by the operational inefficiencies of DISCOs on electricity consumers.

In categorical terms, Nepra instructed K-Electric and Lahore Electric Supply Company to submit similar petitions because any increase in security deposit would be implemented uniformly across the country under a standard tariff structure.

The proposal for a significant increase in security deposit rates met with strong opposition from various interest groups. Prominent voices including those of Arif Bilwani, Tanveer Barry, Imran Shahid of Jamaat-e-Islami, Asim Riaz of the All Pakistan Textile Mills Association and representatives of the Lahore Chamber of Commerce and Industry, rejected the increase, arguing that it stemmed from DISCOs’ own mismanagement and inefficiencies.

A pivotal question that loomed over discussions was whether the increase would apply to mosques and military installations, which neither Nepra nor DISCOs could adequately address.

The proposed hike, designed to cover defaults by consumers, would affect all the existing users. To ease the financial strain, the increased security deposit was suggested to be collected in installments.

However, Nepra Member (Tariff) Mathar Niaz Rana raised questions over the authenticity of security deposit as an audit team of Nepra had identified discrepancies in deposits collected by three DISCOs.

There were also concerns that the rise in security deposit could push more consumers towards alternative energy solutions, such as solar power, thereby reducing the demand and revenue for DISCOs.

Irfan Butt from Gepco’s Mirad Division acknowledged that the shift to solar energy could further dampen consumer demand.

Representatives of the Karachi Chamber of Commerce and Industry voiced concern over the proposed increase, especially for industries. Tanveer Barry pointed out that the hike in security deposit – from Rs2,010 to Rs54,783 – would put an unbearable financial burden on businesses and force them to consider alternative energy sources, such as solar power, to mitigate costs.

He cited figures from Nepra’s State of Industry Report 2024, which revealed a massive gap between the sanctioned load and peak demand pertaining to both K-Electric and DISCOs. He emphasised that the proposed increase in security deposit was an attempt to justify inefficiencies by imposing higher costs on consumers.

Barry and others pointed out that the inflated sanctioned load of DISCOs, in relation to the actual capacity, was driving up security deposit. According to the Nepra report, the sanctioned load for 10 DISCOs was far higher than the peak demand, indicating that consumers had been overcharged for energy they would never consume.

Aamir Sheikh, a representative of the industrial sector, weighed in by highlighting the financial strain industries would bear due to the proposed increase in security deposit. He underscored the challenge of paying Rs250-300 million in additional security deposit, saying that such a move would further burden an already struggling industrial sector.

Sheikh emphasised that those funds, if made available, would be better utilised for expanding the industry and creating jobs rather than masking the inefficiencies of DISCOs.

Arif Bilwani argued that DISCOs were guilty of inflating their sanctioned load, which resulted in collection of inflated security deposit from consumers. His comments reinforced the growing sentiment that the proposed hike was unjustified, especially given the large discrepancies between the sanctioned capacity of DISCOs and the actual demand.

At the conclusion, Nepra Member (Technical) Rafique Ahmad Shaikh categorically said without concrete guarantees of improved service, including an end to 10 to 15 hours of load-shedding, Nepra would not approve the proposed hike in security deposit. He stressed that the authority would wait for the final audit report from its team before taking a decision.

For now, the push for higher security deposit rates remains in limbo, with Nepra’s final determination dependent on the outcome of ongoing audits and the resolution of key questions about efficiency and fairness in operations of DISCOs.