As someone representing LSM industry and the various burdens it is made to carry, a need arose to understand the existing power tariff and its architecture/design.

As the Power Sector is duly regulated by NEPRA, it was also important to understand the various regulations controlling the determination of power tariffs and the possible effects these could have on the power consumers in general and on the Pakistani industry in particular.

A brief foray into the regulations led to the understanding that basically the electricity tariff is required to be based on the specific cost of service for a particular category of electricity customers and nothing else. This basis is correct by all means and nearly unassailable. It is understandable that there can be no one tariff for all categories of electricity consumers when the cost of service for each category is different due to obvious reasons.

The government then has the hegemony and authority to notify the tariff after determination by the Regulator. The powers to notify tariff is understood and also accepted generally.

However, this acceptance only revolves around the fact and requirement that the government may desire to subsidize venerable segments of society from any untoward increase in electricity tariff and as such should retain the powers to notify the electricity tariff. The low tariffs for the protected domestic consumers fall in this subsidized class.

The legacy of WAPDA tariff structure, on the other hand, had an inbuilt mechanism that considered cross-tariff subsidy mechanism as Kosher. WAPDA had used this tool to arrange for what was known then as the lifeline tariff – specially, for users of up to 50 units of electricity and then for the 100 units per month category. Along this cross-tariff subsidy was used to lower the agricultural tube-well tariffs.

It was because of this that the original NEPRA Act, 1997........

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