Key Highlights

This study calls for rethinking the approach for the determination of Use of System Charges (UoSCs), the longstanding bottleneck in the implementation of the CTBCM reform. In response to NEPRA’s hearing notification issued in November 2023, the XW-DISCOs proposed an average UoSC of PKR 25.93/kWh. However, the proposed UoSCs were not approved by NEPRA owing to the large portion of stranded costs and cross-subsidies which not only inflated the UoSC, but made it unattractive for the market participants. In this paper, a UoSC model has been developed for stranded cost recovery, providing a future market outlook across four scenarios for the B4 consumer category of IESCO. This study’s approach takes into account various market size growth rates, different cost allocation techniques, and reduction in the stranded cost leading to lower UoSCs.