The government has capped the buyback rate for electricity at Rs. 10 per unit under net metering, having previously been Rs. 27 per unit, to account for the “exponential increase in the number of solar net metering consumers” and the fiscal constraint on grid consumers.
According to a press release issued by the Finance Division, the Economic Coordination Committee (ECC) of the cabinet, chaired by Finance Minister Muhammad Aurangzeb, took the decision because the flexibility is needed to constantly align the regulatory regime with changes in market conditions to effectively address the increased burden on consumers from the grid.
The buy-back rate has been fixed at Rs10 per unit instead of the NAPP. Justification of the decision is the concern over the increase in solar net-metering customers and their growing negative impacts on the national power grid.
The new provision stipulates that NEPRA shall establish the buyback price at intervals, thus providing a flexible framework under which it will give weight to the condition of the economy.
Old licensure or original agreements or approval under the NEPRA (Alternative & Renewable Energy) Distributed Generation and Net Metering Regulations, 2015, will not be covered under this revised framework.
These license agreements expire with time, thus ensuring the original rights and obligations of these consumers, according to original terms.
The ECC also authorized a revision in regard to the settlement mechanism on electricity billing. Under this new framework, there will be separate tariffs for the imported and exported units.
The new price of Rs10 per unit will apply for the exported units, while costs for the imported units will include tariff charges according to peak/off-peak pricing, inclusive of taxes and surcharges.
The Power Division has been authorized to issue guidelines for NEPRA’s incorporation in the regulatory framework, subject to Cabinet ratification, for clarity and consistency in the application of these changes. The decision follows discussions on the growing impact of solar net metering on the national power grid.
The Power Division cited the need for regulatory reforms to be introduced to address unprecedented drops in solar panel prices that have seen the number of solar net-metering consumers surge.
As of December 2024, solar net-metering consumers would have shifted an estimated Rs 159 billion, which is expected to swell to Rs 4240 billion by 2034 unless the amendments are introduced in a timely manner.
Add to this the 283,000 solar net-metering consumers by December 2024, now reaching a whopping figure from the earlier 226,440 of October 2024. In terms of total installed capacity, 321 MW was recorded in 2021, and by December 2024, the value was 4,124 MW, therefore indicating the fast expansion of the sector.
However, the increase in solar net-metering consumers has resulted in a higher cost of electricity that has built a wall between the government’s efforts at reducing power tariffs.
The ECC went around the issue of how these consumers avert from paying the fixed charge components of the tariff, which include capacity charges and fixed costs incurred during power distribution and transmission, thus placing an inordinate proportion of financial burden upon grid consumers.
Also noted by the committee was that 80% of solar net-metering consumers are concentrated in nine major cities, where high-income areas represent a large percentage. This geographical concentration supports the urgent need for regulatory reforms for fairness and balance within the energy distribution system.
The amendments approved by the ECC represent a critical step for the sustainability of the power sector while protecting the interests of all consumers, especially those who heavily depend on the grid for electricity, said the Finance Division.
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