Prime Minister Orders Review of Net Metering Regulations

Prime Minister has directed NEPRA and the Power Division to reassess and amend net metering regulations following concerns raised by electricity Discos.

Prime Minister has directed the National Electric Power Regulatory Authority (NEPRA) and the Power Division to reassess and amend net metering regulations following concerns raised by electricity distribution companies (Discos).

Net metering, a billing mechanism that enables consumers to feed surplus solar energy back into the grid and receive credits on their electricity bills, is at the center of the proposed regulatory changes.

In a high-level meeting, the Power Division presented its case to the Prime Minister, emphasizing the financial challenges faced by Discos due to the proliferation of net metering.

Officials highlighted that the existing system contributes to significant revenue shortfalls for these companies. To mitigate these financial strains, the Power Division proposed a reduction in the buyback rates for excess solar energy from the current Rs21 or Rs22 per unit to Rs11 or Rs12 per unit.

The Prime Minister has tasked the Power Division with refining a rationalization plan aimed at transitioning from the current net metering system to a gross billing model.

This new approach would differentiate the rates for imported and exported electricity, introduce a separate tariff category, revise buyback rates, amend net metering regulations, and develop a dynamic formula to determine a reasonable payback period for solar energy investments.

Power Minister Awais Leghari, in a separate statement on Wednesday, reassured the public that the government does not intend to impose taxes on solar net metering at this time. He confirmed that the current regulations governing installed solar systems will remain unchanged for now. However, he acknowledged that the net metering system might be revisited in the future due to its potential impact on the fiscal deficit and circular debt.

The move to review net metering regulations comes as Discos report financial strains exacerbated by the widespread adoption of solar energy systems. While net metering encourages renewable energy use and helps consumers lower their electricity bills, the resulting revenue loss for Discos has become a point of concern. By lowering the buyback rates, the government aims to strike a balance between promoting renewable energy and ensuring the financial viability of electricity distribution companies.

The proposed transition to a gross billing system is expected to address these concerns by providing a more balanced approach to energy pricing. Gross billing involves separate rates for electricity consumed from the grid and electricity exported to the grid, potentially leading to a more sustainable financial model for Discos while continuing to support solar energy adoption.

As the Power Division works on the rationalization plan, stakeholders within the renewable energy sector and consumer advocacy groups are keenly watching the developments. The outcome of these regulatory changes will have significant implications for the future of solar energy in Pakistan and the financial health of the country’s power sector.

The government’s commitment to reviewing and potentially amending net metering regulations underscores its effort to adapt to the evolving energy landscape and address the financial realities faced by Discos. As discussions continue, the balancing act between fostering renewable energy growth and maintaining a financially stable power sector remains a critical challenge for policymakers.