Government orders probe into discos’ off-merit power purchases from small producers

ISLAMABAD: The government said on Wednesday it had detected electricity purchases by distribution companies (Discos) from small power producers and captive power plants at rates higher than the national tariff, amid public concern over costly electricity and prolonged loadshedding.

According to an official statement, the purchases were being made through bilateral arrangements outside the national grid and the Independent System and Market Operator (ISMO), in violation of the economic merit order. The statement said the names of the Discos involved and the amount of electricity procured were not disclosed so that an independent inquiry could proceed.

The statement said Power Minister Awais Leghari took notice of the off-take of electricity from small power producers by Discos beyond the national merit order and directed that an independent investigation be launched.

The issue came to light during a stock-taking exercise of Discos and ISMO.

“The matter was revealed during the stock-taking of Discos and ISMO,” it said.

Under the minister’s directions, the practice is to be stopped and brought into line immediately with the provisions of the National Electric Power Regulatory Authority’s (Nepra) grid code, distribution code and directions, the statement added.

Leghari also instructed authorities to coordinate with ISMO for the inclusion of small power producers and captive power plants so that electricity dispatch follows economic merit order principles and ensures the lowest possible cost for consumers, according to the statement.

The Power Division said it had issued instructions to all Discos after the minister’s directions.

“In compliance with the power minister’s directions, the Power Division has issued instructions to all Discos to ensure that no off-merit procurement from SPPs shall be undertaken under any circumstances without obtaining prior explicit approval from ISMO,” the statement said.

The division further said that electricity procurement from small power producers would be allowed only in cases where such supply falls within the prevailing national merit order. This determination would be made on the basis of the incremental cost of generation and through the prescribed mechanism.

The announcement comes at a time when electricity prices and loadshedding have drawn public criticism, with the government now saying it has moved to halt procurement that falls outside the approved merit-based framework.

Official directions issued

The official statement said the government’s immediate focus was to ensure compliance with Nepra’s regulatory framework and to prevent any further off-merit purchases without prior approval from ISMO. Future off-take from small power producers must remain strictly within the national merit order.