A senior regulator has publicly challenged the financial logic behind Pakistan's recently approved Rs332 billion revenue package for the national grid, warning that selective accounting treatment could distort the company's true financial position and inflate consumer tariffs. Main Developments In a dissenting note, Nepra member Amina Ahmed objected to the treatment of over Rs19 billion recorded as payable to the Central Power Purchasing Agency (CPPA) in NGC's 2023-24 financial statements. The majority decision treated this amount as a loan, subtracting it from NGC's assets to calculate its equity, which consequently reduced the permissible return allowed to the company. Ahmed argued that this liability is not a genuine loan but the residual of a 2015 business transfer agreement (BTA) under which NGC transferred assets and liabilities to CPPA. Because liabilities exceeded assets transferred, a net payable arose—and a corresponding receivable was recorded under current assets, reflecting amounts recoverable from power sector entities. Read also: Pakistan's Bank Profits Hit Record but Mask Deep Risks She noted that this receivable is the 'mirror image' of the asset not transferred to CPPA, and had both been transferred together, no liability would remain on NGC's books. The selective recognition of only the liability while ignoring its corresponding asset, she said, produces a distorted equity amount. Background The dispute centers on the three-year combined revenue requirement for National Grid Company (NGC), formerly NTDC, covering FY2022-23 to FY2024-25. NGC had sought Rs478 billion, including Rs112 billion for FY23, rising 45% to Rs163 billion for FY24, and another 25% to Rs203 billion for FY25. In a 2-1 majority ruling, Nepra allowed Rs332 billion—Rs81.5 billion for FY23, a 17% increase to Rs95.6 billion for FY24, and a 62% jump to Rs155 billion for FY25. This translated to approved use-of-system charges (UoSC) of Rs382 per kW per month for FY23, Rs455 for FY24, and Rs710 for FY25. The BTA of June 2015, extended multiple times, created the payable that Ahmed says has grown to over Rs19 billion as of June 30, 2024. She contends that under Nepra's own methodology, current liabilities should be derived from prescribed formulas, not taken as a fixed proportion (2/3) of current assets—a practice that breaks the nexus between the payable and financing of long-term assets. Why It Matters This dissent underscores a systemic flaw in how Nepra computes equity for regulated entities. If liabilities are treated as loans without matching receivables, the equity base shrinks, reducing the allowed return—but also potentially leading to higher tariffs if the company appeals for adjustments. For consumers already facing rising electricity costs, the approved UoSC increases of 17% and 62% over three years will directly impact their bills. The dispute also highlights the need for transparent accounting in the power sector, where billions in receivables and payables often remain unresolved, contributing to circular debt. What's Next Ahmed's note could prompt a review by Nepra or a legal challenge from NGC. The company may seek a reconsideration of the majority ruling, arguing that the treatment of the CPPA payable was flawed. Meanwhile, the approved tariffs for FY23-25 will be incorporated into consumer-end charges, potentially facing further scrutiny from stakeholders.