National Electricity

Policy 2021
Government of Pakistan
TABLE OF CONTENTS
1. PREAMBLE ................................................................................................... 1
2. VISION............................................................................................................ 1
3. GOALS FOR THE POWER SECTOR ......................................................... 1
3.1. ACCESS TO AFFORDABLE ENERGY............................................................................ 2
3.2. ENERGY SECURITY ............................................................................................... 2
3.3. SUSTAINABILITY .................................................................................................. 2
4. KEY GUIDING PRINCIPLES ........................................................................ 2
4.1. EFFICIENCY ........................................................................................................ 3
4.2. TRANSPARENCY .................................................................................................. 3
4.3. COMPETITION .................................................................................................... 3
4.4. FINANCIAL VIABILITY............................................................................................ 3
4.5. INDIGENIZATION, RESEARCH & DEVELOPMENT .......................................................... 3
4.6. ENVIRONMENTAL RESPONSIBILITY ........................................................................... 4
5. POLICY DIRECTION FOR THE POWER SECTOR ................................... 4
5.1. GENERATION ..................................................................................................... 4
5.2. TRANSMISSION................................................................................................... 6
5.3. DISTRIBUTION AND SUPPLY ................................................................................... 6
5.4. SYSTEM OPERATIONS........................................................................................... 7
5.5. MARKET DEVELOPMENT AND OPERATIONS .............................................................. 8
5.6. COST OF SERVICE, TARIFF AND SUBSIDIES ............................................................... 10
5.7. ENERGY EFFICIENCY AND CONSERVATION ............................................................... 11
5.8. INTEGRATED PLANNING ...................................................................................... 11
5.9. GOVERNANCE .................................................................................................. 12
6. POLICY IMPLEMENTATION ..................................................................... 13
6.1. IMPLEMENTATION ............................................................................................. 13
6.2. MONITORING .................................................................................................. 13
6.3. APPLICABILITY, REVIEW AND UPDATING ................................................................. 14
INTERPRETATION OF TERMS

Unless the context otherwise requires, terms used in this National Electricity Policy are
assigned the following meaning:

1. Alternative and Renewable Energy Policy 2019 The renewable energy policy of the
Government of Pakistan, approved by the Council of Common Interests, in the year 2020
2. BOT Build Operate Transfer
3. BOOT Build Own Operate Transfer
4. CCI Council of Common Interests
5. CTBCM Competitive Trading Bilateral Contract Market
6. DFI Development Finance Institution
7. Government The Federal Government of Pakistan
8. IGCEP Indicative Generation Capacity Expansion Plan1 (the rolling generation
capacity expansion plan for future ten years to be prepared under the grid code by the
relevant entity and approved by the Regulator every year)
9. National Electricity Plan The Plan to be developed by the Federal Government in
terms of Section 14A of the NEPRA Act
10. National Electricity Policy This National Electricity Policy 2021
11. National Power Policy 2013 The National Power Policy of the Government of
Pakistan, approved by the Council of Common Interests, in the year 2013
12. NEECA National Energy Efficiency and Conservation Authority
13. NEPRA Amendment Act Regulation of Generation, Transmission and Distribution of
Electric Power (Amendment) Act, 2018
14. NGC National Grid Company
15. PGC Provincial Grid Company
16. Power Generation Policy 2015 The power generation policy of the Government of
Pakistan, approved by the Council of Common Interests, in the year 2015
17. Provincial Government The Government of one of the Provinces
18. PPP Public Private Partnership
19. R&D Research and Development

1
The IGCEP has not been approved by the Regulator at the time of approval of this policy. For the first iteration, IGCEP
assumptions will be approved by the CCI.
20. Regulator National Electric Power Regulatory Authority (NEPRA)
21. SCADA Supervisory Control and Data Acquisition system
22. SDGs Sustainable Development Goals as adopted by the United Nation member
states in 2015
23. SPTL Special Purpose Transmission Licensee
24. TSEP Transmission System Expansion Plan (the rolling transmission system
expansion plan which may be prepared for one, three, five or ten years into the future
under grid code by the NGC and approved by the Regulator, in consultation with the
Provincial Governments)
1. PREAMBLE
1.1. Supply of reliable, secure, efficient and affordable electricity is one of the primary
drivers for sustainable growth of a

1.2. In the past, electricity shortfalls have adversely impacted the socio-economic balance
of the country. The Government framed various policies, from time to time, to address
such issues, including but not limited to policies for the generation and transmission
sectors. The National Power Policy 2013 encompassed all three sub-sectors, i.e.
generation, transmission and distribution, and provided policy goals, targets and
guidelines for the sector. However, on account of multifarious reasons, the
implementation of policy initiatives has focused primarily on the generation sub-
sector. Hence, the goals and targets set for the power sector have not been met in
totality.

1.3. Lately, the NEPRA Amendment Act has been promulgated to set foundation for the
development of an integrated, sustainable and competitive power market.
Accordingly, as envisaged in Section 14A of NEPRA Amendment Act, the
Government has prepared the National Electricity Policy for the development, reform,
improvement and sustainability of the power market and power sector.

1.4. The National Electricity Policy identifies the major goals sought to be achieved for the
power sector, and in this respect, provides policy directions. It also provides the key
guiding principles to develop subservient frameworks that will steer the decision-
making in the power sector to achieve identified goals. However, plans for
implementation or specific operational instructions have not been prescribed, which
shall be prepared by the Government in the form of periodic National Electricity Plans.
Such plans may also provide guidelines for specific initiatives for a particular sub-
sector / segment of the power sector.

2. VISION
To ensure universal access of electricity through a self-sustainable power sector,
developed and premised on: optimal utilization of indigenous resources; integrated
planning approach; efficient, liquid and competitive market design; and affordable &
environment friendly outcome for the consumers.

3. GOALS FOR THE POWER SECTOR

Access to affordable, secure and sustainable energy are the broad and overarching
goals, attainment of which will crystallize the vision of the Government for the power
sector. None of these goals is subservient to any other; all actions taken pursuant to
this National Electricity Policy will ensure balanced implementation that does not
prejudice any one goal for achieving any of the others, while ensuring alignment with
the SDGs. In discharging their respective functions, the Government, the Regulator
and all sector entities, including provincial entities, will be guided by these goals so

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 as to overcome the challenges and impediments faced by the power sector and to
devise future plans of action.

3.1. ACCESS TO AFFORDABLE ENERGY

3.1.1. Accessibility of electric supply to all areas, including rural areas, at affordable rates
is the cornerstone of socio-economic development. Making power available, when it
is not affordable, has limited value. The Government shall strive to ensure that
electricity is accessible to all consumers at rates which commensurate with their
ability to pay, coupled with development of an efficient and liquid market design. A
liquid market design and affordable supply of electricity would also contribute vastly
to the financial turnaround and commercial viability of the power sector.

3.2. ENERGY SECURITY

3.2.1. Energy security, including uninterrupted availability of energy sources, is an essential
goal for the power sector. The Government shall endeavor to diversify the fuel mix of
the generation capacity in the country, through optimal utilization of energy
resources, such as hydro, renewable sources, coal, natural gas and nuclear.

3.3. SUSTAINABILITY
3.3.1. The sustainability of the power sector is of paramount importance, and all sector
entities shall strive to take such steps as are required to ensure such sustainability.
This shall include: measures to minimize environmental degradation, technical and
operational sustainability, integrated development of the power sector, and financial
self-sustainability, including progressive elimination of circular debt. The energy
intensity optimization, coupled with enhanced energy efficiency and conservation
measures, will also contribute towards overall sustainability.

4. KEY GUIDING PRINCIPLES

Six principles shall inform the actions and plans for the power sector so as to enable
it to achieve the goals identified above:

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4.1. EFFICIENCY
4.1.1. Efficiency will be progressively increased across the entire value chain of the sector.
This will be done, broadly, by gradually improving efficiency in the generation fleet
and system operations, optimum utilization of the fuel base, reduction in
Transmission and Distribution (T&D) losses and improvement in collections, demand
side management, conservation, sound governance practices including
decentralization, etc.

4.2. TRANSPARENCY
4.2.1. Transparency is one of the core values of the power sector and is a sine qua non to
attract investment. Transparency also enhances consumer confidence, and
resultantly, improves the liquidity of the sector. Transparency will be ensured through
a predictable policy framework, uniform application of regulatory framework,
elimination of institutional conflict of interest, automation & digitization of processes
and adopting best practices for dissemination of authentic and timely information to
all the stakeholders.

4.3. COMPETITION
4.3.1. Competition contributes towards improving quality, increasing efficiency and reducing
costs. Enhancement of competition in the sector will provide steppingstones for
transition into a competitive wholesale market. Competition shall be the cornerstone
for development and operations of the entire value chain of the power sector.

4.4. FINANCIAL VIABILITY

4.4.1. Sustainability of the entire power sector pivots around the financial and commercial
viability of its individual sub-sectors. This will be done by:

a. promoting investments on least cost basis balanced with development in the

underserved areas;
b. having cost-reflective tariffs in transmission and distribution, to the extent
feasible;
c. timely passing of costs to the consumers, while netting off any subsidies funded
by the Government; and
d. recovery of costs arising on account of open access, distributed generation, etc.
4.5. INDIGENIZATION, RESEARCH & DEVELOPMENT
4.5.1. A multi-pronged approach for indigenization will be adopted, which shall include
promoting local content, transfer of technology, and R&D across the value chain of
the power sector. This may also include Government to Government and Business
to Business agreements, through which the Government or private entities / parties
in Pakistan shall promote transfer of technology. Further, steps will be taken to
facilitate creation of development funds to support domestic R&D as well as
resources needed for augmentation of indigenous capacity.

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4.6. ENVIRONMENTAL RESPONSIBILITY
4.6.1. Environmental responsibility is recognized worldwide as a vital pillar to ensure the
overall sustainability of a power sector. Therefore, all aspects of the sector shall be
guided by environmental targets benchmarked with international commitments,
including carbon footprints (decarbonization) and emission targets for the sector in
.

5. POLICY AREAS FOR THE POWER SECTOR

The National Electricity Policy identifies nine areas of the power sector, in which all
actions shall individually and collectively be aimed at attaining the above-mentioned
goals by applying the key guiding principles, thereby, achieving the vision for the
power sector.

5.1. GENERATION
5.1.1. Sustainable development of the power sector requires that despite varying seasonal
energy requirements, sufficient generation capacity be made available to cater for
the peak demand of the country. The sharing of investment risks and rationalization
of related returns in view of applicable market conditions shall inform the generation
capacity additions. Such additions shall also reflect principles of integrated,
coordinated and sustainable supply of electricity (detailed in Section 5.8), with the
aim of optimal utilization of resources across the entire value chain. Expansion in
generation capacity shall be only on competitive and least cost basis (except for
strategic projects, for which: (a) the qualification and methodology shall be provided
in the National Electricity Plan, (b) the Government, in consultation with the Provincial
Governments, shall approve such projects on case-to-case basis and (c) the relevant
sponsoring Government / Provincial Government shall provide the funding to bridge
the incremental cost (beyond least cost) of any such project). Further, in order to
determine the basis of least cost and to ensure that the consumer gets the cheapest
electricity, while ensuring levelized tariff for different fuels/technologies, the
Government shall conduct necessary consultations with the Provincial Governments
on parameters / basis / assumptions at the time of development of generation
framework.

5.1.2. The generation mix for the sector shall gradually reduce reliance on imported fuels
and shall move towards optimal utilization of local resources such as coal, hydro,
renewable sources, local gas, and nuclear. Such generation mix decisions will be
made as per system of integrated planning (detailed in Section 5.8), with the aim of
transitioning towards a more clean, affordable and secure generation mix.

5.1.3. Only run-of-river hydropower projects i.e., where irrigation, flood control & seasonal
storage are not involved, will be developed, unless otherwise specifically permitted
by the Government in consultation with the concerned Province and with the approval
of the CCI. The run-of-river projects may have some ponding facility for absorption of
daily flow fluctuation and for daily peaking operation of the power plant. The project
should be designed and implemented with a view of optimum utilization of potential
of the site.

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5.1.4. Nuclear generation capacity additions, subject to provisions stipulated in Section
5.1.1, shall be incorporated in the IGCEP on the basis of cross-sectoral decisions by
way of consultative process, taking into account inter alia, economics of generation,
resultant tariff, and demand of the sector.

5.1.5. A sustainable renewable energy market shall be developed, with a progressively

increasing share in power generation as per the IGCEP based on least cost principle.
For such market development, zone-based renewable resource assessment shall be
carried out to identify / prioritize renewable zones on the basis of, inter alia, optimized
levelized cost and firm capacity. Future procurement of renewable generation will be
based on such assessments. The emphasis shall be on introducing measures to
encourage and promote transfer of technology, so that local capabilities are
developed for the renewable energy market.

5.1.6. Effective utilization of local coal and gas resources shall be promoted for power
generation on the principles of least cost and competition.

5.1.7. Distributed generation, including net-metering additions, shall conform to the

integrated planning for the sector. Steps will be taken to integrate distributed
generation in sector-level planning to ensure its sustainability.

5.1.8. Existing public-sector thermal plants shall be reviewed and assessed for privatization,
leasing or other options for their possible future integration in the wholesale electricity
market, or retirement. The mechanism for assessment and subsequent
implementation roadmap shall be stipulated in the National Electricity Plan. Such
implementation mechanism shall account for the social aspects of employee related
matters including, but not limited to relocations, absorption in other public sector
companies, continuation of employment for specified periods on the same terms and
conditions, etc.

5.1.9. This National Electricity Policy shall prevail over the Power Generation Policy 2015
to the extent of any conflict or inconsistency. The remaining policy directives of the
Power Generation Policy 2015 shall continue to remain in field till the same is
superseded by a revised generation policy to be approved by the CCI.

5.1.10. Subject to Article 157(2) of the Constitution, the Provincial Governments may make
their own electricity policies (including generation, transmission & distribution) and
execute related projects within their boundaries without the requirement of selection
by IGCEP, as long as such projects are not connected to the national grid and do not
impose any obligation on any Federal Government entity. Such projects can
subsequently be connected to the national grid, subject to the consent of the Federal
Government, based on the principle of least cost and selection by IGCEP.

5.1.11. Subject to Alternative and Renewable Energy Policy 2019, as amended from time to
time, the concerned Government entity may issue a letter of support to the projects,
that have been issued letters of intent by the Provincial Governments till June 20,
2021, and intend to sell electricity to a Government entity, if such projects are
selected by IGCEP.

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5.2. TRANSMISSION
5.2.1. The transmission network serves as the backbone for a sustainable and secure
sector, which enables delivery of affordable electricity. Efforts shall be made for
development of a robust transmission network which complements generation plans
for smooth dispersal of power between generating stations and load centers. Such
integration will ensure smooth operations of the power sector, while avoiding
congestions and blackouts / brownouts.

5.2.2. Subject to Article 157(2) of Constitution of Pakistan and law, the Provincial
Governments shall have the powers to construct grid stations, lay transmission lines,
and engage in the transmission of electric power within the territorial limits of such
Province. Wherever the Province intends to connect its transmission system to the
national grid, the NGC will be solely responsible for the centralized TSEP. The TSEP
shall provide for integration of the national and provincial transmission systems. For
such integration, the PGCs and SPTLs shall coordinate with the NGC and provide all
relevant data required by the NGC, at the conception stage prior to any execution, to
prepare the TSEP. The NGC, PGC and SPTL, while discharging their respective
responsibilities, shall ensure compliance with TSEP approved by the Regulator.

5.2.3. Different financing or investment options may be explored by the NGC to facilitate
expansion of the transmission network, including financing / investment by Provincial
Governments, PPP models and Government to Government arrangements. All
developments under the PPP model will be carried out on competitive basis,
providing equal opportunity to all interested parties.

5.2.4. The transmission network operator may be restructured or reformed so as to achieve

the policy directives set forth herein, or through any instrument or design developed
/ approved in pursuance of this National Electricity Policy.

5.2.5. Information related to the approved TSEP shall be made public by the NGC on a
timely basis.

5.3. DISTRIBUTION AND SUPPLY

5.3.1. The distribution segment is the interface of the entire sector with the consumers of
electricity. The financial viability of the entire sector is premised on the efficient
operations of the distribution system and timely recoveries from consumers. The
existing operations have resulted in non-recovery of costs determined by the
Regulator (in addition to operational costs over and above the revenue requirement
determined by the Regulator), leading to accumulation of circular debt, thus
threatening the sustainability of the entire sector.

5.3.2. So as to ensure and put in place efficient tariff structures for sufficient liquidity in the
power market, the target for losses and collections shall be revisited by the Regulator,
in order to align the same with the current market realities. These targets shall be
reflected in the determinations of the Regulator. Moreover, timely recovery of bad
debt that is prudent shall be allowed by the Regulator with the incorporation of
facilitative provisions in the regulatory framework as per industry practices and
procedures.

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5.3.3. For the purpose of assistance to the relevant entities in achieving such benchmarks
/ targets, appropriate interventions from other state entities as well as Provincial
Governments shall be sought in a timely manner. Provincial Governments shall
provide all necessary support to the power sector entities for, inter alia, recoveries,
bill collection, theft detection and legal procedures / actions. Specific measures shall
also be introduced for accountability of staff of the distribution companies, with the
aim of meeting such benchmarks / targets determined by the Regulator. Further, in
order to reduce the menace of circular debt, the Government will institutionalize anti-
theft initiatives and efficient recovery systems with the support of law enforcement
agencies.

5.3.4. In order to ensure implementation of duly approved efficient market design, and
accordingly, to promote development of market, the Regulator shall ensure that the
electric power supplier undertakes and performs its duties and responsibilities such
that they are compatible with the principles provided in the approved market design.
The state-owned distribution companies may be restructured or reformed so as to
achieve the objectives set forth herein, or in any instrument or design developed /
approved in pursuance of this National Electricity Policy.

5.3.5. In order to turnaround the performance of state-owned distribution companies, a

strategic roadmap shall be developed by each of them, with the inputs and
consultation of the Ministry of Energy (Power Division). The roadmap shall entail
interventions for improvement of corporate governance, technical capabilities, safety,
and commercial performance. The roadmap shall set out clear activities, and
milestones to be achieved, with timely performance evaluations. The Ministry of
Energy (Power Division) or its designated entity shall also be responsible for
monitoring the performance of state-owned distribution companies in the context of
the roadmap approved.

5.3.6. Different financing or investment options may be explored by the State-owned

distribution companies for expansion of the distribution network, including financing /
investment by Provincial Governments or DFIs, PPP models (only on BOT & BOOT
basis) and Government to Government arrangements. All developments under the
PPP model will be carried out on competitive basis, providing equal opportunity to all
interested parties. All network expansion by distribution companies should be carried
out in accordance with the distribution investment plans approved by the Regulator
and, where applicable, shall be duly aligned with the IGCEP and TSEP.

5.3.7. State-owned distribution companies shall explore options, including use of

technology and outsourcing of functions for improving administrative losses and
collections.

5.3.8. The State-owned distribution companies shall make publicly available the forecasts,
transmission and distribution plans and information regarding network constraints.

5.4. SYSTEM OPERATIONS

5.4.1. Effective and efficient performance of system operations is crucial for the power
sector, as it enables safe, reliable, non-discriminatory and economic dispatch of

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 electric power from generation companies. Per key guiding principles, actions shall
be taken to ensure the integrity of system operations.

5.4.2. Power allocation / distribution from the power pool to state-owned suppliers or any
other entity shall continue in accordance with the existing power pool allocation
mechanism, or as may subsequently be provided for in the National Electricity Plan.

5.4.3. The system operator may be restructured or reformed so as to achieve the objectives
set forth herein or in the Plan, or in any instrument or design developed / approved
in pursuance of this Policy.

5.4.4. The functions of system operator shall be carried out through IT-based automated
systems. This will promote transparency in system operations, leading to safe,
reliable and non-discriminatory economic dispatch.

5.4.5. SCADA and other associated systems which are necessary to integrate higher share
of renewable energy sources in the generation mix will be upgraded.

5.4.6. Information related to short term forecasts, transmission congestions, loading and
available capacity of transmission lines, dispatch based on unit commitment, market
prices, reserves and all information that is necessary for implementation of
competitive wholesale market shall be made public by the system operator.

5.5. MARKET DEVELOPMENT AND OPERATIONS

5.5.1. The efficient and liquid power market design, as approved by the Regulator
(CTBCM), will contribute for attaining the policy goals. The approved wholesale
market design ensures the following objectives:

a. providing open access to all market participants on a non-discriminatory basis;

b. creating an environment to attract investment;
c. contribute in improving power sector security of supply;
d. ensuring further evolution of wholesale market to advanced phases;
e. promoting competitive arrangements, both for and in the market;
f. promoting payment discipline among market participants;
g. eliminating sovereign guarantees for purchase of power over time through
improvement in market conditions;
h. ensuring compatibility of wholesale market design for operation of retail market
in the future;
i. ensuring transparency, predictability and accountability in the market; and
j. creating an environment for compatibility / participation in regional electricity
market.
5.5.2. The approved wholesale market design, its implementation and subsequent
development takes into account the following:

a. enabling the choice of changing supplier of electricity, initially only for large or
Bulk Power Consumers, followed by gradual liberalization of the retail market;

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 b. creating incentives to promote entry and sustainability of the most efficient
generation in the system;
c. no anomalies shall be created that allow any participant to take undue advantage
of market conditions;
d. creating minimum burden for the government in the form of subsidies through
liberalization of the market;
e. maintaining investor confidence by honoring the existing contracts (Energy /
Power Purchase Agreements) and / or seamless transition of such contracts in
the market design by mutual consent;
f. providing a level playing field to all market participants through uniform
application of cross-subsidization and other grid charges to consumers of all
suppliers;
g. the Government shall take a decision on the recovery of costs that arise due to
advent of the open access and market liberalization;
h. ensuring open access to information and undertaking other transparency
measures in the market especially providing for credible and independent service
providers in the market;
i. standardizing trading instruments to enhance liquidity;
j. commercialization of strategic projects;
k. ensuring proper settlement mechanisms for the imbalances resulting from trade
among different market participants;
l. ensuring accountability of market participants to bring discipline in the market;
m. building on experiences of international market development and local market
conditions;
n. allowing, through simple regulatory adjustments, the future evolution towards
increasing competition for and/or in the market; and
o. fair allocation of risks amongst market participants.
5.5.3. The market operator is responsible for the development/ evolution of the wholesale
market, in consultation with the stakeholders, subject to approval by the Regulator.

5.5.4. In order to ensure implementation of wholesale market design and its further
evolution, the Regulator shall in a timely manner frame, modify and evolve regulatory
framework for, inter alia, supply, procurement, open access / wheeling, competitive
bidding, import of power, and ensure effective market monitoring and enforcement.
Provided that after implementation of CTBCM, every transmission licensee and
distribution licensee shall offer, to all market participants, non-discriminatory open
access / wheeling to its respective transmission or distribution system and
interconnection services in accordance with CTBCM on the terms determined under
the policy and legal framework.

5.5.5. The market operator may be restructured or reformed so as to achieve the objectives
set forth herein, or in any instrument or design developed / approved in pursuance of
this National Electricity Policy.

5.5.6. The Regulator shall also ensure that the market operator publishes all information
that is necessary for operations of competitive wholesale market.

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5.6. COST OF SERVICE, TARIFF AND SUBSIDIES
5.6.1. Financial sustainability of the sector is premised on the recovery of full cost of service,
to the extent feasible, through an efficient tariff structure, which ensures sufficient
liquidity in the sector.

5.6.2. The Regulator shall align adjustments in generation-end tariff with the consumer-end
tariff, which shall be submitted by the licensees and determined by the Regulator in
a timely manner, in respect of both quarterly and monthly adjustments.

5.6.3. In view of various parameters, including (a) the socio-economic objectives; (b)
budgetary targets in field; and (c) recommendations of the Regulator with respect to
consumer-end tariff for each state-owned distribution company, the Government may
continue to propose uniform tariff across the consumers and regions. In pursuance
thereto, the Regulator shall, in public consumer interest, determine a uniform tariff
(inclusive of quarterly adjustments) for all the state-owned distribution companies.
Additionally, Government may maintain a uniform consumer-end tariff for K-Electric
and state-owned distribution companies (even after privatization) through
incorporation of direct / indirect subsidies.

5.6.4. In due course, financial self-sustainability will eliminate the need for Government
subsidies (except for any subsidies for lifeline, industry or agriculture consumers, as
per prevailing Government considerations). The subsidies that are to be provided by
the Government shall be released in a timely manner to contribute to the financial
sustainability of the power sector.

5.6.5. The Regulator, in order to ensure liquidity of the power sector, provide a level playing
field for the development of wholesale market and to facilitate prudent projects of the
Government, may impose additional charge(s) which shall be deemed to be costs
incurred by the distribution companies / electric power supplier(s). Such additional
charge may take into account the sustainability, socio-economic objectives and
commercial viability of the sector, affordability for the consumers and the policy of
uniform tariff. Similarly, the Government may also incorporate, in the consumer-end
tariff, any surcharge imposed by it, which shall also be deemed to be cost incurred
by the distribution companies / electric power supplier(s) and shall be collected by
them in discharge of their public service obligations.

5.6.6. Distributed generation is a growing and recognized phenomenon in electricity

markets worldwide. The Regulator will devise facilitative guidelines for registration of
distributed generation (i.e., consumers connected to the grid) with distribution
companies. Such registration process shall enable incorporation of distributed
generation in integrated planning and demand projections by the concerned entities.
Further, the Regulator shall devise roadmap for the progressive elimination of
licensing requirements for distributed generation.

5.6.7. The Regulator will provide for recovery of costs arising on account of distributed
generation and open access in the consumer-end tariff, as decided by the
Government. Further, the Government may announce, from time to time, various
concessional packages to incentivize additional consumption to minimize such costs.

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5.7. ENERGY EFFICIENCY AND CONSERVATION
5.7.1. Energy conservation and efficient use of energy are effective tools to manage the
demand / supply of electricity and can lead to improved energy intensity index. The
cost of one megawatt-hour saved through energy efficiency and conservation is much
lower than the corresponding cost of generating one megawatt-hour. Accordingly,
concerted efforts shall be made to promote efficiency and conservation measures,
which shall serve as a first fuel for the above purpose.

5.7.2. All relevant power sector entities will ensure strict compliance and enforcement of the
efficiency standards and conservation measures set out by National Energy
Efficiency and Conservation Authority (NEECA). In order to facilitate discharge of
functions by NEECA, the power sector entities shall assist, inter alia, in the following:

a. implementation of strategic plan;

b. relevant quantitative or techno-economic analysis;
c. any relevant survey, surveillance, monitoring, inspection and / or energy audits;
d. electrical consumption statistics and / or assessments;
e. inputs required for the development of schemes, processes, standards, codes,
product labels of equipment and appliances;
f. any input and / or feedback related to demand side management;
g. relevant inputs required to prepare or update national energy conservation policy
and / or program(s); and
h. inputs required for identification of relevant opportunities and technology
demonstrations, undertaking pilot projects, information and outreach, training and
education, and conservation best practices.
5.7.3. In order to promote efficient use of available resources, the Regulator, in collaboration
with NEECA, will promote incentive-based demand participation mechanism through
regulatory framework.

5.8. INTEGRATED PLANNING

5.8.1. To meet the existing and future energy needs of the country, power sector planning
will be integrated with the energy value chain. Accordingly, Ministry of Energy shall,
henceforth, develop the future integrated energy plan on sustainable basis. In this
regard, the corresponding transitional roadmap, structural adjustments and
institutionalization shall be effectuated within one year from the notification of this
National Electricity Policy. The developed integrated energy plan, and accordingly,
the principles stated therein, including vis-à-vis fuel mix, shall be reflected in the
frameworks established under this National Electricity Policy and in the investment &
power acquisition programs of the licensees. This will enable achievement of the
stated policy goals.

5.8.2. As an immediate step, the IGCEP1 (the rolling generation capacity expansion plan
for future ten years to be prepared under the grid code by the relevant entity and

1
The IGCEP has not been approved by the Regulator at the time of approval of this policy. For the first iteration, IGCEP
assumptions will be approved by the CCI.

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 approved by the Regulator every year) shall be approved by the Regulator, after
public hearing and consultation with stakeholders, particularly Provincial
Governments. NGC shall submit the TSEP (the rolling transmission system
expansion plan which may be prepared for one, three, five or ten years into the future
under the grid code by the NGC and approved by the Regulator) in support of the
IGCEP to the Regulator for approval. The IGCEP and TSEP shall be followed and
implemented by all stakeholders (including one-window facilitators set-up by the
Federal and Provincial Governments), which shall be updated on an annual basis or
as may be stipulated in the National Electricity Plan.

5.8.3. To ensure access to affordable supply of electricity, the criteria for the inclusion of
transmission cost for candidate generation projects may be considered in the
National Electricity Plan in consultation with the Provincial Governments. Such
criteria shall be approved by the CCI.

5.8.4. Future procurement of electricity will be in accordance with the IGCEP and TSEP,
pursuant to applicable policy / framework and regulatory stipulations.

5.8.5. Necessary provisions for export of power shall be incorporated in the integrated
planning and framework(s) developed under this National Electricity Policy.

5.8.6. Generation & transmission expansion planning and system operations for the K-
Electric shall be progressively integrated in the system to meet the policy goals. The
roadmap shall be stipulated in the National Electricity Plan, or through a design or
instrument developed / approved in pursuance of this National Electricity Policy.

5.8.7. The Government aims for progressive elimination of load shedding in all areas,
including rural areas, for consumers who pay their electricity bills, in accordance with
the legal framework of the country. Further, in order to promote electricity access to
areas where grid expansion is financially unviable, off-grid and micro-grid solutions
will be explored. Integrated planning shall provide for rural electrification and
provision of electricity to unserved areas of the country.

5.8.8. The Regulator shall publish on its website the approved IGCEP, TSEP and
distribution investment plans.

5.9. GOVERNANCE
5.9.1. Good governance is a pre-requisite for efficient and sustainable performance of any
entity, and eventually contributes towards sustainability of the entire power sector. All
sector entities and stakeholders shall adopt principles of transparency, fair play, and
good governance in their decisions and operations.

5.9.2. The processes and decision-making time at the ministerial level, as well as related
departments and sector entities, shall be optimized to contribute towards efficient
operations. Additionally, all entities having their own corporate existence and being
managed by their own board of directors shall act transparently in accordance with
the approved strategic framework.

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5.9.3. Board of directors of state-owned entities shall be appointed in accordance with the
corporate governance rules. All appointments to the board of directors shall be on
merit. Performance benchmarks shall be established for the entities, and
performance of the boards will be reviewed against such benchmarks.

5.9.4. The Government shall explore various options of privatization to improve the
efficiency of the state-owned entities, where applicable.

5.9.5. An independent assessment of regulatory past performance will be carried out under
the Authority of CCI, no later than one year from the notification of this National
Electricity Policy, and subsequently after every four years, with the aim of identifying
actions and capacity-building measures to improve the R abilities to cope
with the emerging challenges in the sector and minimizing regulatory lag, in line with
integrated planning mechanisms for the sector. Principles and broad contours for
such assessment shall be provided for in the National Electricity Plan.

5.9.6. Performance standards, codes and other regulatory frameworks will be updated so
that they can realistically be followed.

6. POLICY IMPLEMENTATION
6.1. IMPLEMENTATION
6.1.1. The success of a policy is dependent on its effective implementation. To achieve the
goals of this National Electricity Policy, it is necessary that appropriate plans,
frameworks, guidelines and mechanisms are formulated, from time to time, to provide
the operational tools for implementation.

6.1.2. This National Electricity Policy serves as the overarching umbrella for reform,
development, improvement and sustainability of the power sector. In furtherance of
the same, the Government will, with the mutual consultation of Provincial
Governments, prepare a National Electricity Plan. The National Electricity Plan will
be a five-year plan with fifteen years perspective.

6.1.3. The National Electricity Plan shall provide guidelines, implementation mechanisms
and tools for the realization of the policy goals for the power sector. It will entail high-
level tasks, timelines and responsibilities of respective sector entities to meet policy
directives. Pursuant to the National Electricity Plan, the Government may issue
specific frameworks to facilitate implementation in a particular sub-sector. Any
provision of the National Electricity Plan that is inconsistent with the National
Electricity Policy shall be void.

6.2. MONITORING
6.2.1. Ministry of Energy (Power Division) shall be responsible, among other matters, for
monitoring the implementation of the National Electricity Policy and National
Electricity Plan.

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6.2.2. All respective entities (federal/provincial) will provide a progress report on quarterly
basis to the Ministry of Energy (Power Division) with respect to such aspects of the
National Electricity Policy and National Electricity Plan that fall within their domain.

6.2.3. The Ministry of Energy (Power Division) will review and monitor the progress of
implementation of the National Electricity Policy and National Electricity Plan. In the
event such review indicates that there should be meaningful interaction of the power
sector with other sectors, so that the National Electricity Policy is implemented in its
true perspective, then the Ministry of Energy (Power Division) will collaborate with
such other sectors / ministries for alignment of the power sector initiatives, and such
ministries will facilitate fulfillment of the vision of the National Electricity Policy.
Accordingly, Ministry of Energy (Power Division) will review progress on quarterly
basis, and a detailed report on the progress and implementation status of the National
Electricity Policy will be submitted on annual basis to CCI.

6.2.4. For the purposes of Section 6.2 and 5.3.5, the Ministry of Energy (Power Division)
may designate any entity (or entities) to perform the tasks assigned under these
sections.

6.3. APPLICABILITY, REVIEW AND UPDATING

6.3.1. The National Electricity Policy shall come into force immediately. Existing policies of
the Government in the power sector, to the extent that they are not in conflict with the
National Electricity Policy, shall continue to remain in field, till such time that revised
policy frameworks are prescribed, or the existing policies are amended /modified by
the Government. National Power Policy 2013 shall be repealed with the notification
of this National Electricity Policy.

6.3.2. The Government, on its own motion or on the request of the Provincial Government,
may review and propose revisions/amendments in the National Electricity Policy from
time to time to CCI.

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