Business Recorder
ISLAMABAD: National Electric Power Regulatory Authority (Nepra) has penalised CPPA-G, the Market Operator (MO) of the power sector, for financially overburdening consumers through violations of the Economic Merit Order (EMO) and curtailment of cheaper electricity generated by wind power plants. In January 2024, CPPA-G claimed a Fuel Charges Adjustment (FCA) of Rs 7.1308 per kWh against an actual pooled fuel cost of Rs 14.602 per kWh. This represented a significant deviation from the reference fuel cost of Rs 7.4894 per kWh determined by the Authority in its decision dated July 14, 2023, regarding power purchase price references for FY2024-25. The magnitude of this deviation—where the actual fuel cost was nearly double the reference—raised serious concerns among stakeholders and was deliberated during a public hearing held on February 23, 2024. READ MORE: Jan 2024 FCA case: Nepra warns NGC of action over non-compliance In its FCA decision for January 2024, issued on February 26, 2024, the Authority took serious notice of the unprecedented fuel cost and decided to initiate a formal investigation under Section 27-A of the NEPRA Act. The objective was to ascertain the reasons for the high fuel cost and determine any potential violations of the Act, rules, regulations, codes, licence conditions, or registration requirements by CPPA-G and the National Grid Company (formerly known as National Transmission and Despatch Company, NTDC). The Authority noted that the estimated excess cost borne by electricity consumers due to these violations amounted to billions of rupees. CPPA-G neither refuted this figure nor provided any counter-evidence. It failed to fulfil its obligations as Market Operator by not providing adequate cost-benefit analyses of wind curtailment decisions, withholding substitute dispatch details and plant-wise outage schedules, and not proposing or implementing remedial measures to prevent recurrence of such deviations. Following these developments, the Authority constituted a five-member Investigation Committee on March 6, 2024, under Section 27-A of the Nepra Act. The committee comprised officials from Nepra’s Monitoring & Enforcement, Tariff, Legal, and Technical departments. The Investigation Committee concluded that CPPA-G’s failure to include generation from RLNG-based power plants, in line with Gas Supply Agreements (GSAs) and decisions of the Economic Coordination Committee (ECC), constituted negligence and led to inaccurate reference setting. After reviewing the facts, the committee’s findings, submissions by CPPA-G, its response to the show-cause notice dated July 1, 2025, and the hearing held on August 20, 2025, the Authority determined that CPPA-G failed to provide a satisfactory explanation. The show-cause notice highlighted a fundamental deficiency in CPPA-G’s generation projections used for tariff reference setting—specifically the exclusion of RLNG-based generation from the January 2024 reference. CPPA-G attributed this omission to erratic winter demand and the need to keep gas-based plants on standby or warm start. However, Nepra rejected these arguments as untenable. It stated that RLNG quotas mandated by the ECC and minimum off-take commitments under take-or-pay clauses in GSAs were known well in advance and constituted binding contractual obligations. By ignoring these factors, CPPA-G prepared a reference that failed to reflect actual system operations. The committee also found that CPPA-G did not adequately highlight the legal ambiguity arising from SNGPL’s failure to sign revised GSAs, thereby creating regulatory uncertainty without proper disclosure. Nepra held that CPPA-G violated Section 31(3)(i) of the Nepra Act and the Nepra Guidelines for Determination of Consumer-End Tariff (Methodology and Process), 2015, by submitting inaccurate generation projections. The omission of ECC-mandated RLNG quotas and contractual obligations resulted in a structurally flawed reference, which materially inflated the FCA for January 2024 and undermined tariff predictability and affordability for consumers. During the investigation, CPPA-G was directed to submit cost-benefit analyses of wind curtailment, disclose substitute dispatch details, and provide plant-wise outage schedules. However, the committee found that CPPA-G failed to furnish the required information, which was necessary to assess the prudence of wind curtailment and related Net Power Miscellaneous Variation (NPMV) claims of approximately Rs 4.4 billion in January 2024 alone. The Authority further noted that CPPA-G failed to provide any substantive response to these deficiencies, either in writing or during the hearing. Consequently, NEPRA held CPPA-G in violation of Section 31(3)(i) and Section 44 of the NEPRA Act, as well as its obligations as Market Operator regarding reference setting, merit order compliance, financial impact disclosure, and wind curtailment analysis. Accordingly, CPPA-G has been directed to pay a fine of Rs 10 million into the Authority’s designated bank account. Copyright Business Recorder, 2026
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