MEPCO losses raise regulator’s alarm

ISLAMABAD: The National Electric Power Regulatory Authority has expressed deep concern over rising losses, underutilised funds and shortcomings in the investment roadmap submitted by Multan Electric Power Company under its five-year plan for 2025-26 to 2029-30.

The regulator said Mepco did not adequately substantiate its proposed Rs119.4 billion investment outlay while seeking approval. It questioned whether the proposed spending for the tariff control period was warranted, stressing the need to evaluate each project’s techno-commercial gains, including higher sales, loss reduction, improved voltage levels and better reliability indicators such as SAIFI and SAIDI.

Nepra pointed out that it had set steadily declining transmission and distribution (T&D) loss targets — from 13.12% in FY2020-21 to 11.34% in FY2024-25 — to improve sector efficiency. However, Mepco missed the benchmark, posting losses of 13.33% by the close of FY2024-25.

The authority noted that the company later revised its investment proposal to Rs86.463 billion. Under the regulatory framework, distribution companies are permitted to recover Return on Rate Base (RoRB) calculated through the Weighted Average Cost of Capital (WACC), covering both equity returns and borrowing costs, while depreciation is allowed to repay principal debt.

Mepco plans to finance its programme through internal sources, including RoRB and depreciation. It sought approval for Rs86,463 million in investment, while projected RoRB and depreciation over the same period stand at Rs97,717 million.

During its review, Nepra observed that the proposed plan does not accurately represent ground realities. It highlighted that several grid stations and network assets are operating below capacity, warning that approving the plan in its current form could worsen underutilisation and push tariffs higher for consumers.

The regulator emphasised that improved planning, engineering design, and precise demand assessment — in line with grid and distribution codes, performance standards and planning guidelines — could significantly reduce investment needs without affecting system reliability or security. Better asset management and optimal use of existing infrastructure were also underscored.

A detailed examination of Mepco’s submissions revealed instances where actual spending fell short of allocations approved by Nepra. Delays were also recorded under the STG category, mainly due to land acquisition issues, procurement hurdles and weak coordination between departments, pointing to gaps in planning and execution oversight.

Nepra further noted that key operational indicators, including T&D losses and reliability metrics (SAIFI/SAIDI), continue to worsen, indicating areas needing urgent attention. It directed Mepco to enhance preventive maintenance, strengthen energy accounting systems and improve network control to ensure consistent and reliable supply.

On safety and human resource performance, the regulator acknowledged a decline in fatalities but maintained that any such incident remains unacceptable. It also observed that while digital tools like Advanced Metering Infrastructure (AMI) and Enterprise Resource Planning (ERP) systems have been introduced, their integration and effective use for performance tracking and decision-making remain limited.

The regulator added that investment execution during the previous Multi-Year Tariff (MYT) period was marked by delays and only partial adherence to planning standards, underscoring the need for stronger institutional mechanisms for planning, monitoring and implementation.