Senate Committee Orders NEPRA to Probe IPP Payments as Electricity Costs Surge

Pakistan's Senate Standing Committee on Cabinet Secretariat on Tuesday directed NEPRA (the National Electric Power Regulatory Authority) to conduct a comprehensive investigation into the performance of Independent Power Producers (IPPs), including their capacity payments, energy payments, and contractual extensions. The committee, chaired by Senator Saleem Mandviwalla, also called on NEPRA to submit a detailed comparative report on its findings. The directive follows serious concerns raised by parliamentarians over alleged over-invoicing and the absence of effective oversight of actual IPP generation capacity.

What the Committee Has Directed

NEPRA appeared before the committee on Tuesday and briefed members on tariff determination, capacity payments, energy payments to IPPs, and extensions granted to power producers beyond their original contractual end dates. Following that briefing, the committee issued formal directions for a full investigation.

Parliamentarians highlighted three specific concerns:

• Alleged over-invoicing — IPPs billing the power system for more than what was actually generated or owed
• Extensions beyond agreed timelines — power plants continuing to collect payments past their contracted expiry dates without fresh competitive bidding
• No periodic verification mechanism — the regulator currently lacks an effective system for regularly confirming whether a plant's declared capacity matches its actual generation output

Why Capacity Payments Are Central to Pakistan's Electricity Cost Problem

IPPs in Pakistan are paid through two streams: capacity payments (also called take-or-pay charges, owed regardless of whether electricity is actually dispatched to the national grid) and energy payments (paid only for units of electricity actually generated). Over the past several years, capacity payments have grown into one of the largest cost components embedded in the per-unit electricity price borne by consumers across all distribution companies — LESCO, IESCO, MEPCO, PESCO, HESCO, QESCO, FESCO, TESCO, GEPCO, and K-Electric.

The structural concern is that Pakistan may be paying full capacity charges for plants operating below their rated output, or for plants running on informal extensions well after their Power Purchase Agreements (PPAs) were originally set to expire. Without independent periodic verification of actual plant performance, the regulator has limited ability to confirm whether capacity invoices are accurate — and any discrepancy is ultimately absorbed by consumers through higher tariffs.

The committee's directive adds formal parliamentary scrutiny to an issue that has been central to Pakistan's power sector policy debate, and signals growing legislative pressure on NEPRA to move beyond tariff determination and take a more active role in auditing IPP performance.

11 kV Vacuum Circuit Breaker Approval Still Pending

Separately, the committee took up a prolonged delay in the regulatory approval of 11 kV vacuum circuit breakers — equipment used in medium-voltage distribution networks operated by DISCOs. NEPRA told the committee that a decision on this matter is expected by the end of the current month. The committee deferred detailed discussion and directed that all relevant stakeholders be invited to the next meeting for a comprehensive review.