A member of the National Electric Power Regulatory Authority (Nepra) has raised concerns over the accounting method used to approve the National Grid Company (NGC) revenue requirement, arguing that it unfairly reduced the company’s allowed financial return.
In a dissenting note on Nepra’s 2-1 decision, Member (Tariff and Finance) Amina Ahmed questioned how more than Rs. 19 billion payable to the Central Power Purchasing Agency (CPPA) was treated during the calculation of NGC’s equity. She argued that classifying the amount as a loan resulted in a lower permissible return for the state-owned transmission company.
Nepra recently approved a Rs. 332 billion revenue requirement for NGC, formerly known as the National Transmission and Despatch Company (NTDC), under its multi-year tariff framework covering FY2022-23 to FY2024-25. The approved amount was significantly lower than the Rs. 478 billion requested by the company.
Under the approved tariff, NGC will receive Rs. 81.5 billion for FY2022-23, Rs. 95.6 billion for FY2023-24, and Rs. 155 billion for FY2024-25. Nepra 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 explained that the Rs. 19 billion payable to CPPA originated from the 2015 Business Transfer Agreement, under which NGC transferred market operation assets and liabilities to CPPA.
She noted that the payable has a matching receivable linked to assets that were not transferred under the same agreement. According to her, these two balances are directly connected and should be treated equally in the financial calculations.
Ahmed argued that including the liability while excluding the corresponding receivable reduces NGC’s equity base, leading to a lower return than the company should be allowed under the tariff framework.
She also stated that Nepra’s methodology normally calculates current assets and liabilities using standard formulas rather than actual balance sheet figures. Therefore, she believes the payable to CPPA should not be considered long-term financing.
According to Ahmed, the most accurate approach would be to either offset both the liability and the matching receivable against each other or exclude both from the calculation. She warned that recognizing only one side of the transaction creates an inaccurate picture of the company’s finances and may lead to an unfair tariff decision.
