NEPRA: The Regulator That Did Not Regulate
How Pakistan's electricity regulator spent twenty-five years approving the tariff structures that produced the crisis it was created to prevent
By Asad Baig · Lahore · April 2026 · Approx. 9-min read
The institution at the centre of the failure
Most discussions of Pakistan's electricity crisis focus on prime ministers. Benazir signed the 1994 contracts. Nawaz expanded the system. Musharraf repeated the mistake in 2002. Imran promised reform and failed. Shehbaz is doing whatever his coalition allows.
This framing is misleading. Prime ministers come and go. The average Pakistani prime minister stays in office for about eighteen months. The regulator that approves IPP tariffs day in and day out, that monitors plant performance, that verifies cost claims, that conducts the public hearings, that protects consumer interests in the dry technical detail where every battle is actually won or lost, has been continuous for twenty-eight years. That regulator is NEPRA.
If you want to understand why Pakistani electricity is unaffordable, the National Electric Power Regulatory Authority deserves more attention than any individual prime minister. It is the institutional architecture of the disaster.
This article is about NEPRA. What it was supposed to do. What it actually did. What the 2020 inquiry found about its conduct. The 2025 salary scandal that revealed who the institution actually serves. And what reform of NEPRA itself would look like.
What NEPRA was supposed to do
NEPRA was established in 1997, three years after the 1994 Power Policy, specifically to act as an independent regulator of Pakistan's electricity sector. Its job, on paper, was simple. It would set tariffs. It would monitor power producers. It would verify their cost claims. It would protect consumer interests through transparent, evidence-based decisions.
The legal framework gave NEPRA real powers. It could demand information from any entity in the power sector. It could conduct audits. It could reject tariff requests that did not meet its standards. It could levy penalties on entities that violated their licence conditions. It could initiate proceedings on its own motion, without waiting for a complaint.
Senior NEPRA officials were given high government grades, comparable to senior judges and four-star generals in formal status. The budget was substantial. The mandate was clear.
In practice, NEPRA failed at every primary function for which it was created.
What NEPRA actually did
The 2020 Power Sector Inquiry Report, headed by Muhammad Ali, the former chairman of the Securities and Exchange Commission of Pakistan, documented NEPRA's failures with specificity. The findings were not vague. They were precise enough to support legal action.
On excess profits: NEPRA approved tariff calculations using methodologies that allowed IPPs to systematically extract excess returns above their permitted return on equity. The 1994 contracts allowed 15 to 18 percent return on equity. The 2020 inquiry found IPPs earning 50 to 70 percent annual profits. That gap, sustained over two decades, came from NEPRA's tariff approvals.
On verification: NEPRA never adequately verified IPP claims about fuel consumption, operations costs, or maintenance expenses. It accepted the IPPs' own submissions as factual, without independent assessment. When numbers seemed high, they were accepted. When budgets were inflated, they were approved. When fuel efficiency claims were optimistic, they were taken as given.
On capital costs: NEPRA accepted IPP submissions of capital cost without independent assessment, allowing inflated cost claims to be locked into tariff calculations. Some 1994-era plants had effective capital costs three to four times higher than comparable plants in Bangladesh and Vietnam. NEPRA approved them anyway. I have written about this mechanism in detail at The Capital Cost Trick.
On working capital: NEPRA approved monthly debt servicing payments to IPPs while tariff calculations assumed quarterly payments. The two-month gap each quarter was paid by consumers but never actually owed. The 2020 inquiry estimated this single technical error at billions of rupees per year of unjust profit. I have written about this at The Working Capital Scam.
On hearings: NEPRA conducted public hearings on tariffs, but the proceedings were largely formalities. Substantive opposition rarely changed outcomes. Tariff petitions were typically approved with minor adjustments. Industry representatives, civil society, and consumer groups attended. Their objections were noted. The decisions were made in advance.
This is, taken together, the picture of an institution that performed the rituals of regulation while delivering the substance of capture.
NEPRA's response to the 2020 report
When the 2020 report became known through press leaks in mid-2020, NEPRA's response was instructive. The regulator issued a statement. The substance of the statement was this:
"NEPRA will take every action within its powers to ensure that consumer interest has not been compromised by carefully looking into any misrepresentation of facts and figures by any IPP. The said report was not shared with NEPRA despite a clear agreement on the issue."
In plain English. The regulator that had spent twenty years approving the tariffs the report criticised claimed it had not been "consulted" on findings about its own conduct.
This was technically accurate. The report was prepared by an external committee. NEPRA was not a member of the committee. NEPRA was not given a copy of the draft for review.
It was also substantively meaningless. The findings concerned NEPRA's own historical decisions, which were already in NEPRA's own records. The regulator did not need a copy of the report to know what it had approved. NEPRA's records included every tariff decision, every methodology used, every number accepted. The report's findings were documented from sources NEPRA itself maintained.
There was no internal review at NEPRA. No officials resigned. No tariffs were revised. The regulator continued doing exactly what it had been doing.
This is what bureaucratic self-protection looks like. The institution issues a statement that defends itself in technical terms, deflects responsibility outward, and proceeds as before.
The 2025 salary scandal
If any single fact captures the relationship between NEPRA's regulatory failures and personal interest, it is this.
In February 2025, while ordinary Pakistanis were facing record electricity bills and approximately 700,000 textile workers had lost their jobs because of the tariffs NEPRA had approved, NEPRA's chairperson and members quietly approved increases to their own remuneration. The increases were not modest. Salaries were tripled. Cumulative monthly packages rose to approximately Rs. 2.95 to 3.25 million per month.
That is higher than the salaries of judges of Pakistan's superior courts.
The increases were approved by NEPRA officials for themselves, in apparent violation of established procedure that required mandatory federal cabinet approval. The cabinet was not consulted. The increases were implemented anyway.
The story was reported by Dawn newspaper on 17 February 2025. NEPRA did not issue a meaningful response. No corrective action was announced. The salaries continued.
THE 2024-25 NEPRA SALARY SCANDAL IN ONE SENTENCE
While Pakistani consumers were facing record electricity bills produced by tariffs NEPRA had approved, the regulator's chairperson and members quietly tripled their own pay above superior court salaries, in apparent violation of legal procedure, without any meaningful consequence.
This is not a technical scandal. It is a moral one. The institution charged with protecting consumers from excess IPP profits was found to be quietly extracting excess profits for its own officials, in violation of its own legal framework, while consumers' bills reached historic highs.
I find it difficult to read about this episode without anger. The same officials whose tariff approvals had cost the country trillions of rupees, who had been named in a critical inquiry report, who could see the suffering their decisions had caused, decided that what was needed in early 2025 was a tripling of their own pay.
The Power Division above NEPRA
Above NEPRA sits the Power Division, the federal ministry that sets overall policy. Its head is the Federal Secretary for Power, a BPS-22 grade officer, the highest civil service rank.
Federal Secretaries of Power have changed many times over the past three decades. The institutional pattern has been remarkably consistent.
Renegotiation discussions with IPPs that produce announcements but limited substantive change. Acceptance of IPP-favourable interpretations when contractual ambiguities arise. Resistance to forensic audits that would expose past decisions. Movement of senior officers between ministry positions and IPP-related advisory roles after retirement. Selective application of regulations, strict against weak players, lenient toward politically connected ones.
The revolving door between the Power Division, NEPRA, and the IPP boards is the architecture of regulatory capture. Officers retire from senior public-sector roles and join the boards or advisory positions of the very entities they were previously regulating. The legal framework permits this. There is no mandatory cooling-off period. The choice is whether to use the framework to prevent capture or to allow capture to operate freely. Across thirty years, the choice has consistently been the latter.
I have written about the bureaucratic architecture in detail at my pillar on the IPP system.
What reform of NEPRA would look like
The 2020 inquiry did not call for the abolition of NEPRA. It called for reform. There is a difference.
The reform agenda, as documented across the 2020 report and the IEEFA reports of 2024-2025, has five specific elements.
Independent appointments. The chairperson and members of NEPRA should be selected through a transparent process that involves parliament, civil society, and the courts. Not appointed by the government of the day. Independence from political influence is the foundation of any meaningful regulator.
Mandatory cooling-off periods. Senior NEPRA officials should be barred from joining boards or advisory positions of regulated entities for a defined period after leaving office. Five years would be reasonable. The current zero years is an open invitation to capture.
Public verification of major tariff decisions. Every tariff approval above a defined threshold should be accompanied by independently verifiable assumptions, made publicly available, with a comment period that allows substantive technical review by qualified outside experts.
Salary structures aligned with public service. NEPRA officials should be compensated as public servants at appropriate civil service grades, not at private-sector parity. The 2025 salary scandal showed what happens when this principle is abandoned.
Active enforcement of penalties. NEPRA has the legal power to penalise IPPs that violate licence conditions. It has rarely used that power. An active enforcement record would itself create deterrence against the IPP behaviour the inquiry found.
None of these are radical. All are present in functioning regulators in comparable jurisdictions. The choice in Pakistan has been not to implement them. That choice can be changed.
What you can do
NEPRA reform is not something an individual citizen can deliver. It requires legislative action, ministerial leadership, and sustained political pressure.
What you can do is make NEPRA's record common knowledge. The institution has survived because the substance of its conduct has been hidden behind technical language about tariff methodology, return on equity calculations, and capacity factors. Once enough Pakistanis know what NEPRA approved, who benefited, and what its officials paid themselves, the political environment shifts.
Three concrete actions.
Forward this article to ten people who pay an electricity bill in Pakistan. Discuss it. Argue with parts of it. Make the basic facts of NEPRA's record common knowledge.
Ask politicians the specific questions. Will you commit to mandatory cooling-off periods for retiring NEPRA officials? Will you reverse the 2025 salary increases? Will you support independent appointments of NEPRA chairpersons and members? Make support conditional on specific commitments.
Read the rest of the explainer cluster. NEPRA is one of four mechanisms that produce your bill. The others are take-or-pay, the capital cost trick, and the working capital scam. Each is explained in its own short post. Together they tell the full story.
In closing
NEPRA was created to be an independent regulator that protected consumer interests against the structural advantage of large power producers. That was the entire point of its existence.
In its twenty-eight years of operation, the institution has approved the tariff structures that produced excess IPP profits estimated by its own commissioned inquiry at hundreds of billions of rupees. It has accepted IPP cost claims without independent verification. It has approved working capital arrangements that systematically over-compensated IPPs at consumer expense. It has issued statements defending its conduct rather than reviewing its conduct. And in early 2025, while the consequences of its decisions were visible in the closure of textile mills and the Rs. 50,000 monthly bills of middle-class households, its officials decided to triple their own pay.
This is the regulator at the centre of Pakistan's electricity crisis. Reforming it is one of the ten necessary steps in the broader reform of the IPP system. Reform without it is impossible. With it, real change becomes possible.
Now you know what NEPRA actually did. Pass it on.
Thank you for reading.
, Asad Baig, Lahore, April 2026
Frequently asked questions
What is NEPRA? NEPRA, the National Electric Power Regulatory Authority, was established in 1997 as Pakistan's independent regulator of the electricity sector. Its mandate is to set tariffs, monitor power producers, verify their costs, and protect consumer interests.
What did NEPRA do wrong according to the 2020 inquiry? The 2020 Power Sector Inquiry Report documented systematic NEPRA failures including approving methodologies that allowed IPPs to extract excess returns, accepting IPP cost claims without independent verification, allowing inflated capital costs to be locked into tariff calculations, and approving the working capital arrangement that overcompensated IPPs by billions per year.
What was the 2025 NEPRA salary scandal? In February 2025, NEPRA's chairperson and members quietly approved increases to their own remuneration without obtaining the mandatory federal cabinet approval. The cumulative salary package was raised to approximately Rs. 2.95 to 3.25 million per month, higher than the salaries of judges of Pakistan's superior courts. Reported by Dawn newspaper on 17 February 2025.
Who can fire NEPRA officials? NEPRA officials are appointed and removed by the federal government through processes defined in the NEPRA Act. There is no popular mechanism for removal. Reform of the appointment process is one of the recommendations of the 2020 inquiry.
Has any NEPRA official been held accountable for the failures documented in the 2020 inquiry? No. As of April 2026, no NEPRA officials have been removed or sanctioned in connection with the inquiry's findings. The 2025 salary increases were implemented despite the unresolved findings.
What is the difference between NEPRA and the Power Division? The Power Division is the federal ministry that sets overall power sector policy, headed by the Federal Secretary for Power. NEPRA is the independent regulator that implements specific tariff and licensing decisions within the policy framework. The 2020 inquiry documented failures at both institutions.
Sources and notes
- Power Sector Inquiry Report 2020, Government of Pakistan, headed by Muhammad Ali, former SECP Chairman (ARY News mirror)
- Dawn, Top NEPRA officials hike salaries without cabinet nod (17 February 2025)
- NEPRA State of Industry Reports 2015-2024 (nepra.org.pk)
- IEEFA Reports on Pakistan Power Sector by Haneea Isaad (2024-2025)
- Transparency International Pakistan, NEPRA (transparency.org.pk/napra)
- The News, What is really going on in power sector? (2 April 2017)
Related reading from Asad Baig
The pillar this explainer supports
Sibling explainers in this cluster
- What Is a Take-or-Pay Contract? A Plain-English Guide for Pakistanis
- The Capital Cost Trick: How Inflated Costs Locked In Inflated Tariffs
- The Working Capital Scam: NEPRA's Quietest Subsidy to IPPs
Asad Baig