NEPRA Power Pricing Hearings: Impact on Tax Deductions

The National Electric Power Regulatory Authority (NEPRA) wrapped up public hearings on Tuesday in Islamabad, addressing power sector pricing adjustments, with decisions deferred pending data verification, a development with notable tax implications for businesses. Our tax law firm highlights the need for clients to monitor these adjustments for potential cost impacts on taxable expenses.

The hearings, held at NEPRA headquarters, covered the third quarterly adjustment for FY 2024-25 and the monthly Fuel Charges Adjustment (FCA) for March 2025, chaired by the NEPRA Chairman with participation from CPPA-G officials, Ministry of Energy, and the business community. DISCOs proposed a Rs51.493 billion relief in the quarterly adjustment, potentially reducing tariffs by Rs1.50 per unit over three months, applicable to all consumers except lifeline customers, pre-paid meter users, and EV charging stations. However, NEPRA demanded explanations from HESCO, MEPCO, and QESCO for the absence of senior officials.

The FCA hearing saw CPPA-G propose a three paisas per unit reduction, the ninth consecutive month of FCA cuts, excluding K-Electric, lifeline, protected, pre-paid, and EV users. Yet, NPCC and CPPA-G CEO Rihan Akhtar warned of future FCA hikes due to summer demand, lower hydropower, and reliance on imported fuels, potentially increasing operational costs for businesses.

From a tax law perspective, clients must assess how these adjustments impact deductible expenses under Section 29 of the Income Tax Ordinance, particularly for electricity costs in business operations. A tariff reduction could lower taxable expenses, while future hikes may increase deductibility opportunities. The integration of captive power plants into the grid, as noted by Amir Sheikh, raises questions about Fuel Price Adjustment (FPA) refunds, which could affect tax credits for industrial clients. March 2025 generation data showed 8,409 GWh, with nuclear energy at 26.43%, gas/RLNG at 29.81%, and a net cost of Rs9.2251 per kWh, emphasizing the need for cost tracking in tax filings.

Our firm advises clients to monitor NEPRA’s final decisions, evaluate electricity expense deductions, and ensure compliance with Federal Board of Revenue (FBR) regulations, preparing for potential cost fluctuations in the power sector.