MEPCO losses worry regulator

The National Electric Power Regulatory Authority (Nepra) has aired serious concern over greater losses and funding under-utilisation as well as found fault with the multibillion-rupee investment plan submitted by Multan Electric Power Company (Mepco) under its five-year programme spanning 2025-26 to 2029-30.

According to the regulator, Mepco failed to justify its Rs119.4 billion five-year investment plan while asking for approval.

"Whether the claimed investment of Rs119,466 million for the tariff control period from FY 2025-26 to 2029-30 is justified," Nepra questioned and underlined the need for assessment of techno-commercial benefits of each project such as additional sales, reduction in losses, improvement in performance indicators, ie, voltages, and improvement in SAIFI/SAIDI (System Average Interruption Frequency Index/ System Average Interruption Duration Index).

Nepra noted that it had set progressively decreasing transmission and distribution (T&D) loss targets – from 13.12% in financial year 2020-21 to 11.34% in FY 2024-25 – to enhance efficiency in the power sector. In comparison, Mepco fell short of the goal and recorded T&D losses of 13.33% at the end of FY 2024-25.

The regulator observed that Mepco had revised its investment plan to Rs86.463 billion. Nepra allows power distribution companies (DISCOs) the recovery of Return on Rate Base (RoRB) based on the Weighted Average Cost of Capital (WACC), which reflects the return on equity and the cost of debt. Similarly, the depreciation charge is allowed for the recovery of principal debt.

Nepra further noted that Mepco intends to arrange funds through its own resources (RoRB and depreciation) to support the implementation of its investment plan. Moreover, the petitioner requested a total investment of Rs86,463 million whereas the RoRB and depreciation over the discussed period were estimated at Rs97,717 million.

The regulatory authority, during the evaluation of Mepco's investment plan, observed that it did not accurately reflect the actual operational conditions of the network. "Multiple grid stations, transmission and distribution assets are not optimally utilised and under-loaded; if the proposed investments are approved as submitted, they may further exacerbate asset underutilisation and increase consumer tariff."

It was of the view that with proper planning, engineering design, accurate need assessment pursuant to the Grid Code, Distribution Code, Performance Standard Rules, Planning Guidelines, etc (collectively referred to as "applicable documents"), asset management and optimal utilisation of existing infrastructure, the overall investment requirement could be substantially optimised without compromising system reliability or security.

Nepra carefully examined Mepco's submissions and explanations concerning investment utilisation and operational performance. In several instances, actual investment showed underutilisation against the Nepra-approved allocations.

Delays were also noted under the STG head, primarily attributable to land acquisition and procurement constraints as well as inadequate interdepartmental coordination, reflecting deficiencies in timely planning and effective milestone monitoring and implementation.

Also, technical and operational performance indicators, including T&D losses and reliability indices (SAIFI/SAIDI), continue to deteriorate and highlight areas requiring improvement. "Mepco is, therefore, required to strengthen preventive maintenance practices, improve energy accounting mechanisms and enhance system control measures to ensure sustained operational efficiency and reliable supply to consumers," it said.

With regard to safety and human resources performance, although a reduction in fatalities has been noted, the happening of any fatal incident remains a matter of serious concern. Moreover, while digital systems such as Advanced Metering Infrastructure (AMI) and Enterprise Resource Planning (ERP) have been deployed, their integration and effective utilisation for performance monitoring and informed decision-making remain limited.

Nepra said investment implementation during the previous Multi-Year Tariff (MYT) control period reflected delays and partial compliance with established planning guidelines, thereby necessitating improved institutional planning, monitoring and execution frameworks.