A dissenting member of the National Electric Power Regulatory Authority (Nepra) has challenged the accounting methodology used in approving the National Grid Company’s (NGC) Rs. 332 billion revenue requirement, arguing that inconsistencies in the treatment of assets and liabilities resulted in a lower permissible return for the state-owned transmission company.
In a dissenting note on Nepra’s recent 2-1 decision, Member (Tariff and Finance) Amina Ahmed questioned the treatment of more than Rs19 billion payable to the Central Power Purchasing Agency (CPPA), which the majority decision classified as a loan while calculating NGC’s equity base, reported Dawn.
The regulator recently approved a combined revenue requirement of Rs. 332 billion for NGC, formerly the National Transmission and Despatch Company (NTDC), covering FY2022-23 to FY2024-25 under the multi-year tariff framework. The approved amount was significantly lower than the Rs. 478 billion sought by the company.
Under the approved decision, Nepra allowed Rs. 81.5 billion for FY23, Rs. 95.6 billion for FY24 and Rs. 155 billion for FY25. It also approved use-of-system charges (UoSC) of Rs. 382 per kilowatt per month for FY23, Rs. 455 for FY24 and Rs. 710 for FY25.
In her dissent, Ahmed argued that the Rs. 19 billion payable to CPPA originated from the 2015 Business Transfer Agreement under which NGC transferred market operations assets and liabilities to CPPA.
She said the liability has a corresponding receivable that represents assets not transferred under the same agreement, making the two balances “mirror images” of each other.
According to the dissenting note, recognizing the liability while excluding the matching receivable artificially reduces NGC’s equity base and, consequently, the return the company is allowed to earn under the tariff determination.
Ahmed further argued that Nepra’s prescribed methodology calculates current assets and current liabilities using standard formulae rather than actual balance sheet figures, meaning the payable to CPPA should not be treated as long-term financing of assets.
She maintained that either both the liability and the corresponding receivable should be netted off or both excluded from the calculation, warning that recognizing only one side of the transaction distorts the company’s financial position and results in an inaccurate tariff determination.
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