Update (March 2026)
Since the publication of the Prosumer Regulations, 2026, the policy landscape surrounding rooftop solar generation in Pakistan has continued to evolve rapidly. The initial notification of the regulations triggered considerable public debate and concern among consumers, energy professionals, and policymakers alike, particularly regarding the apparent shift of existing net-metering participants to the newly introduced net-billing framework.
In response to the growing public reaction, the federal government intervened at the highest level. The Prime Minister directed the Power Division to engage with the National Electric Power Regulatory Authority (NEPRA) and review the regulatory framework, with particular emphasis on safeguarding the interests of existing rooftop solar consumers. Public reporting indicates that the Power Division subsequently filed a review petition before NEPRA seeking reconsideration of aspects of the notified regime affecting approximately 466,000 registered solar prosumers.
Following this development, NEPRA issued a draft amendment to the Prosumer Regulations for public consultation. The proposed amendment significantly clarifies the position regarding existing agreements executed under the repealed 2015 net-metering framework. Under the revised language, approvals, licences and agreements granted under the earlier regulations would continue to be governed by the billing mechanism provided in the repealed framework until the expiry of their original contractual term.
Of particular legal interest is the drafting technique used in the proposed amendment. The text states that the protective provision relating to existing agreements “shall be deemed to have taken effect on 9 February 2026 and shall always be deemed to have had effect accordingly.” In legislative and regulatory practice, such deeming clauses are commonly used to address potential interpretive disputes by clarifying that the regulator’s intended position has applied from the outset.
From a legal perspective, this development is significant for two reasons. First, it suggests an acknowledgment that the earlier drafting of Regulation 21(2) may have created uncertainty regarding the treatment of existing net-metering agreements. Second, it reflects a broader policy recognition that abrupt alteration of established contractual frameworks can raise complex legal and commercial questions, particularly where investments were made in reliance on the earlier regulatory regime.
These developments also illuminate a deeper constitutional dimension that may arise in future litigation. While tariff policy typically falls within the regulatory discretion of specialised bodies such as NEPRA, sudden regulatory shifts that materially affect existing economic arrangements may engage broader constitutional principles.
In particular, Article 18 of the Constitution of Pakistan, which guarantees the freedom to conduct lawful trade or business subject to reasonable regulation, may become relevant where regulatory changes substantially disrupt established commercial ecosystems. Pakistan’s rooftop solar sector now encompasses installers, equipment suppliers, financiers and service providers whose business models developed around the net-metering framework introduced in 2015.
Similarly, Article 24 of the Constitution, which protects property rights subject to lawful authority, may also be implicated where regulatory action materially diminishes the economic value attached to existing assets or contractual arrangements. While courts generally afford considerable deference to regulatory authorities in technical sectors such as energy pricing, they have historically emphasised that subordinate legislation must remain consistent with statutory authority and principles of fairness.
At the time of writing, the regulatory process remains ongoing. NEPRA has invited stakeholder comments on the proposed amendment, and the final position of the regulator will likely emerge after completion of the consultation process. As such, the Prosumer Regulations, 2026 should presently be viewed not as a settled endpoint, but as part of an evolving regulatory transition in Pakistan’s energy sector.
For consumers, investors and industry participants, the episode illustrates a broader lesson in regulatory governance: energy policy reforms must balance financial sustainability of the grid with the need for legal certainty and investor confidence. How that balance is ultimately struck in the case of Pakistan’s rooftop solar regime will likely shape the trajectory of distributed renewable energy in the country for years to come.
Editor’s Update (March 2026):
This article has been updated (see above and below) to reflect recent developments following the notification of the NEPRA Prosumer Regulations, 2026. In particular, it incorporates the Prime Minister’s directive for regulatory review, the filing of a review petition before NEPRA concerning the treatment of existing net-metering consumers, and the regulator’s subsequent publication of a draft amendment proposing continued application of the earlier billing framework to existing agreements until expiry of their contractual terms.
Introduction
Distributed solar (“prosumer”) generation has expanded rapidly in Pakistan. Estimates now put nationwide rooftop solar at roughly 6,000 MW. Policymakers say this surge, under the one-to-one net‑metering regime, has destabilized utility finances. In February 2026 NEPRA issued the Prosumer Regulations, 2026 (SRO 251(I)/2026), repealing the 2015 Net Metering Rules and replacing them with a net‑billing framework. Under the new scheme, excess generation is bought by utilities at the national average energy purchase price (around Rs11/unit) instead of the full retail tariff. The immediate fallout, including a planned contract term cut from 7 to 5 years and a sharp fall in export credits, has drawn intense public criticism and even a Prime Ministerial review directive (as of February 11, 2026).
NEPRA’s regulations apply to all prosumers (home, commercial, and industrial), capping facilities at 1 MW. Under the new net‑billing rules, electricity drawn from the grid continues to be charged at consumer tariffs (often over Rs50/kWh), while exports are credited at the wholesale average rate (about Rs11/kWh). In effect, new and even existing solar contracts will earn far less per unit exported. The legal challenge is whether NEPRA had the power to do this, and whether it can retroactively change the economics of contracts made under the earlier regime.
NEPRA’s Regulatory Authority (Sections 7(1) and 47 of the Act)
The 1997 Electric Power (OGPA) Act vests NEPRA with broad rule-making power. Section 7(1) states that NEPRA is “exclusively responsible for regulating the provision of electric power services”. Section 47(1) explicitly empowers NEPRA to make regulations “for performance of its functions under this Act” (not inconsistent with the Act and its rules) by official notification. Notably, section 47(2)(d) authorizes rules on “the procedure for metering, billing and collection of electric power charges by the licensees”. In other words, the Act expressly covers billing arrangements.
- Section 7(1): Broad statutory mandate. The regulator “shall be exclusively responsible” for setting electricity service rules.
- Section 47(1): Rule-making power. NEPRA can make regulations to carry out its functions under the Act. Subsection (2)(d) specifically includes billing procedures.
- Enabling Clause: The new Prosumer Regulations themselves invoke “section 47 read with section 7(1)” as the source of authority. Thus, on its face, NEPRA relies on these provisions to justify both repealing the 2015 rules and setting a new billing formula.
The statute also requires NEPRA to publish draft regulations for comment (“previous publication… in two newspapers… for not less than 30 days”) before final adoption. NEPRA did publish a draft (December 2025) and held a public hearing prior to notification. Whether that process was meaningfully open to input is disputed, but on paper, the procedural prerequisites of section 47 were met.
In sum, the Act gives NEPRA general regulatory power over tariffs and billing. Repealing prior regulations is not prohibited; regulations routinely supersede older ones. The key legal question becomes the scope of that power: did the Act allow NEPRA to change the financial terms of existing net‑metering contracts by new regulation? The Act imposes no explicit restriction on retrospective effect, but it also does not explicitly authorize altering vested contractual rights. NEPRA’s position is that its statutory mandate includes the authority to change billing methods, hence the sweeping new rules. Opponents will argue that this exceeds what “regulations” under the Act can do, especially to concluded agreements.
Repeal of the 2015 Regulations
Regulation 21 of the 2026 Prosumer Rules explicitly repeals the earlier net‑metering regulations: “The NEPRA (Alternative & Renewable Energy) Distributed Generation and Net Metering Regulations, 2015 shall stand repealed upon coming into force”. In other words, NEPRA declared the old regime void and adopted a new framework simultaneously. The 2015 Regulations were themselves subordinate legislation (made under the Act), so NEPRA does have the competence to withdraw them by fresh regulations. In that sense the repeal is a straightforward exercise of rule-making power.
However, repeal of the old rules triggers the question of what happens to contracts and rights established under them. The new regulations attempt to “save” those agreements but with a twist. Regulation 21(2) provides that licenses and agreements under the repealed rules “shall continue until expiry” except that billing will follow the new regime from the next billing cycle. The text clarifies: valid distributed-generation agreements will be billed at the national average power purchase price until their original term ends, and after that any extension will also use the new rates.
This means that NEPRA is not formally voiding existing contracts; it keeps them “alive” , but it unilaterally alters their economic terms. As NEPRA puts it, all “existing prosumers” are effectively switched to the new net-billing method, with export credits limited to the wholesale average rate. In practice, the one-to-one meter-offset benefit of the 2015 net-metering agreements is gone; instead, the exported kWh earn only about Rs11/unit (the National Average Energy Purchase Price, or NAEPP). This is a dramatic change from the full retail tariff credit (often double or more) guaranteed under the original scheme.
In short, the 2026 Regulations collapse net-metering into net-billing for everyone. For example, Dawn reported that “existing prosumers will be shifted immediately to net-billing instead of net-metering”, even though they had contracted for seven-year net-metering deals. Under the new rules, exported units are paid at roughly Rs11/unit (NAEPP) rather than the consumer rate (often Rs40, 50+). By capping export credit at the average wholesale rate, NEPRA has significantly cut the return on already-commissioned solar projects. (For imports, the consumer pays the full tariff as before.)
Key changes for existing contracts: NEPRA’s net-billing framework revises three core terms of the old deals:
- Credit rate: Exported energy is now bought at the NAEPP (≈Rs11) instead of credited at the full retail tariff.
- Billing cycle: Roll-over credit is shortened. Under net-metering, any export surplus was traditionally banked for up to 3 months; the new rules allow only one-month rollover before payment.
- Contract term: The original net-metering contracts were 7 years (renewable). NEPRA leaves those contracts in force until expiry, but has cut new deals to 5 years and says any extensions will follow the new terms.
These changes were implemented by a swift rule change. After a brief public hearing in early February 2026, NEPRA issued the final SRO without alteration. Industry had raised concerns about the draft regulations, but the authority declined to amend them.
Application to Existing Agreements
Legally, applying a new billing regime to contracts made under the old rules is the most contentious aspect. NEPRA’s approach was to save contracts but override certain terms by regulation. The agency contends that its authority to set billing procedure (per section 47) means it can impose the NAEPP credit as a regulatory condition, essentially treating the regulation as part of the contract. Indeed, the new rules state that NEPRA may revise the price by notification “and the rate so revised shall be deemed incorporated in the agreement”. In effect, NEPRA argues the contract always contemplated that the buyback rate could be changed administratively.
Critics counter that this is a unilateral post‑agreement contract modification without mutual consent. The prosumer agreements signed under the 2015 rules were on a NEPRA-approved form that presumably promised net-metering credits based on the then-applicable tariffs. They did not promise to accept a later, sharply reduced price. By forcing existing generators to accept a lower export rate, NEPRA has essentially rewritten their deals by regulation. Whether that is legally permissible depends on one’s view of NEPRA’s mandate and the nature of the rights created by the 2015 scheme.
- Retroactive effect: The new rules are effectively retroactive: they change the financial outcome of power generated and exported in future billing cycles under already-effective contracts. Dawn noted that prior official assurances (by NEPRA and government) “that the terms of contracts with existing prosumers would remain unchanged” proved to be untrue. The regulator’s move immediately broke those promises.
- Statutory power vs. contract rights: Section 47 allows NEPRA to regulate billing procedures, but the Act does not explicitly authorize any particular buyback rate. A strong argument can be made that NEPRA’s power extends to adjusting terms that were put into contracts by its own previous regulations. Indeed, in India regulators have been allowed to do just that: in Adani Power Rajasthan, the Appellate Tribunal for Electricity upheld the regulator’s authority to apply new tariff rules to existing power purchase agreements, citing Supreme Court precedent that “regulations…can intervene and override existing contracts” to align them with the regulatory scheme. By analogy, a Pakistani court could view NEPRA’s net-billing scheme as a lawful exercise of its tariff-setting function, even if it affects old contracts.
- Subordinate legislation limits: On the other hand, fundamental administrative law precepts suggest caution. Subordinate regulations must stay within the scope delegated by the parent statute and generally should not violate vested rights created under that statute. Critics will argue that once a contract is lawfully executed, its essential bargain should not be altered retrospectively by the regulator, absent clear legislative authorization. The 1997 Act does not explicitly say regulators may rewrite private contracts; it only broadly covers billing procedures. If NEPRA is seen as effectively reducing the contracted value of existing agreements, opponents may claim this exceeds NEPRA’s delegated power (ultra vires) or violates legal expectations.
- Contractual terms: It bears noting that the 2015 agreement form might have contained clauses allowing the tariff or billing method to change by regulatory directive. (Many power agreements include terms that the utility can implement regulatory tariffs as they change.) NEPRA has even built into the new rules a provision that any revised rate “shall be deemed incorporated in the agreement”. If such clauses exist, a court could treat the shift in buyback rate as a self-executing regulatory adjustment rather than a genuine ex post contract amendment.
In summary, while NEPRA clearly had authority to repeal the old regulations and set new rules prospectively, its extension of the new billing formula into existing contracts treads on delicate ground. The legality hinges on whether those contracts are treated as freely amendable by NEPRA’s regulatory power, or as protected undertakings that cannot be impaired without legislative backing. NEPRA’s critics will argue the latter, pointing to the retroactive cost imposed on ordinary citizens who invested under the old policy.
Administrative Law Principles
Several key administrative law doctrines come into play:
- Ultra Vires (Beyond Power): If NEPRA’s actions are deemed outside the Act’s authority, they are ultra vires. As noted, section 47 empowers NEPRA to fix billing procedures, but it must be consistent with the Act’s objects. Opponents may contend that altering contracts’ financial benefits is not a mere “procedure” but a substantive change requiring higher authority (i.e. an Act of Parliament). Proponents point out that courts in energy cases have allowed regulators broad leeway, but this is unsettled in Pakistan.
- Legitimate Expectation: Government assurances can create an expectation that rules will not change arbitrarily. Here, prosumers could argue they had a legitimate expectation that the net-metering framework would hold for the life of their contracts. Indeed, Power Minister Awais Leghari publicly stated in Senate that NEPRA had “not changed anyone’s agreement”, suggesting to investors that existing terms were safe. When NEPRA went back on that assurance, affected consumers may claim their reasonable expectations have been frustrated. Courts often protect such expectations unless there is a compelling public interest and fair process in overturning them.
- Procedural Fairness: Section 47(3) of the Act required NEPRA to publish draft regulations for comment. NEPRA did hold a hearing on the draft Prosumer Regulations, but observers noted the process was perfunctory. For instance, a Dawn report said NEPRA “restricted dozens of relevant consumers… from suggesting alternative solutions” and then promptly issued the final rules unchanged. If true, this raises fairness concerns: affected parties were not heard meaningfully. In judicial review, courts may inquire whether NEPRA gave a fair opportunity to stakeholders before imposing such a momentous change.
- Reasonableness and Proportionality: Judicial review may also consider whether NEPRA’s decision was a reasonable response to the situation. Regulators have discretion to adjust policy for public interest, but they must weigh that against individual rights. Here, NEPRA justified the switch by pointing to massive fiscal losses under the old regime. A court might accept that protecting the power sector’s viability is a legitimate goal. However, it may also question whether less drastic measures (e.g. gradual tariff adjustments or exemptions for current prosumers) were considered. The lack of any phase-in or grandfathering for most existing users could be viewed as disproportionate.
In sum, administrative law doctrine demands that NEPRA act within its legal mandate, follow fair process, and balance interests. If NEPRA is challenged in court, it must show that its regulations were made under proper authority, that stakeholders were given notice and a chance to comment, and that the new net-billing scheme is a rational means of furthering energy policy goals. Critics will highlight broken promises and abrupt implementation, while NEPRA will emphasize its statutory right to revise billing rules for the sake of the national grid.
Constitutional and Contractual Rights
Although the 1997 Act does not expressly protect prosumer contracts, constitutional principles could be invoked. Affected generators might claim that changing their agreed export rate infringes their property or contract rights. Article 24 of the Constitution recognizes the right to property (subject to law), and Article 4 enshrines the rule of law. By analogy, forcing parties to accept reduced payment may be viewed as a taking of economic value under colour of law. The state’s failure to honor earlier commitments could potentially be challenged as arbitrary or discriminatory. For example, Senator Ali Zafar warned that policy reversals on ordinary citizens undermine trust and investor confidence.
However, no fundamental right absolutely guarantees the original terms of a contract will be upheld. The courts may deem the dispute purely one of statutory interpretation and administrative law, rather than striking down the change as unconstitutional. If the regulations are found valid on their face, contract and property claims may have to be resolved through compensation or adjustment, not invalidation of the rule.
In practical terms, any lawsuit would likely turn on the Act’s wording and the reasonableness of the change, rather than a direct constitutional voiding. Still, the strong language of Article 4 (“the dignity of man and each individual constitutes the inviolable… obligation of the State”), and the principle that the state should honor its promises, could color judicial sympathy toward prosumers. A court could interpret “authority” in Article 24 as requiring NEPRA to act fairly when depriving anyone of property (including contractual benefit).
Prime Minister’s Directive and Policy Review
The regulatory turmoil has reached the highest levels of government. In October 2025, Prime Minister Shehbaz Sharif directed the Power Division and NEPRA to review and verify the new buyback tariff before finalizing the reforms. This indicates that the executive branch is cautious about the sudden change. The PM’s intervention suggests the rules may not be set in stone and that NEPRA should consider the broader implications on consumers and investment.
Legally, the Prime Minister’s announcement does not invalidate the SRO; once gazetted, NEPRA’s regulations are in force unless set aside by a court or amended. However, the directive may affect the context in which courts view the issue. If a case reaches the courts, a judge might note that the government itself has signaled a review. This could influence remedial measures (e.g., granting temporary relief or sending the matter back for reconsideration) on the basis that the policy is under active re‑examination. In any event, the PM’s policy shift underscores the unsettled nature of the net-metering debate and the tension between regulatory decisions and political oversight.
Lessons from Other Jurisdictions
Policy transitions in rooftop solar have faced similar challenges abroad. In India, for instance, regulators at times changed net-metering or open-access charges. Notably, the Appellate Tribunal for Electricity upheld a ruling that new tariff regulations can override older power contracts. In Adani Power Rajasthan v RERC, APTEL cited the Supreme Court to affirm that regulations “can intervene and override existing contracts, aligning them with the regulatory framework”. Thus, Indian jurisprudence leans toward allowing regulatory updates to adjust contracts, provided the statutory mandate is clear. That said, Indian state policies often grandfather past installations to some degree, and disputes continue over fairness of retrospective rate cuts.
In Germany, by contrast, long-term stability has generally been the norm. Early solar installations under Germany’s Renewable Energy Act (EEG) received guaranteed feed-in tariffs for 20 years. Crucially, those tariffs ran out only at the end of that fixed term , they were not cut short mid-contract. After subsidy expiration, old installations retained certain benefits: they kept their grid-connection priority and even received compensation for curtailment of output. The transition to market-based support in Germany was thus largely phased and predictable. By analogy, Pakistan’s abrupt mid-term changes to many existing deals would be unusual in the German model.
Other countries (e.g. some US states) have sometimes frozen new solar incentives while honoring existing contracts, or limited retroactivity. A common lesson is that abrupt policy reversals can trigger backlash and legal challenges. Pakistan’s approach of imposing the new billing rate immediately on thousands of current prosumers is more aggressive than most peers have attempted.
Conclusion
NEPRA’s 2026 Prosumer Regulations rest on broad statutory powers, and the agency plainly had authority to revise billing methodology for future contracts. What is legally unsettled is whether those powers extend so far as to alter the core terms of pre‑existing net-metering agreements. By repurposing section 47’s general billing mandate to cut the export price for installed prosumers, NEPRA has raised serious questions of fairness and delegated authority. Affected solar customers will likely challenge the rules in court, arguing that their contractual rights (and legitimate expectations) have been infringed. The government’s own review process suggests these regulations may evolve.
Practically speaking, the outcome may hinge on how zealously a court defers to NEPRA’s technical judgments versus how strongly it protects private agreements. If courts apply a high duty of fidelity to the original contracts, NEPRA’s retroactive rate cut could be struck down or limited. If instead they view the Act’s delegation as authorizing comprehensive grid‑stability measures, they may uphold the net‑billing scheme, perhaps with tweaks. In either case, the debate underscores the need for carefully balancing the state’s reform agenda with the rule-of-law rights of investors and consumers.
Key Takeaways
NEPRA’s legal authority under sections 7(1) and 47 of the OGPA is broad, including billing rules. The 2026 Regulations validly repeal the old 2015 rules, but the attempt to apply the new net-billing terms to existing contracts is controversial. Administrative law concerns (ultra vires, fair process, legitimate expectation) and constitutional principles are all implicated by this retrospective application. Internationally, energy regulators have tended to grandfather older projects and limit retroactivity; Pakistan’s regulator has chosen a far-reaching approach that is likely to face intense legal scrutiny. As things stand, the Prosumer Regulations may be enforced, reviewed or revised, but any court challenged will need to weigh policy imperatives against the protection of vested rights.
Sources:
NEPRA’s Prosumer Regulations 2026; OGPA 1997, sections 7(1) and 47; contemporary news reports; APTEL/India case analysis; German policy analysis.
Update March 2026 :
A Policy in Flux: Government Review, NEPRA’s Draft Amendment, and What It Means for Legal Risk
Since notification of the Prosumer Regulations, 2026 on 9 February 2026, the legal and policy position has become unusually dynamic—so much so that the stability of the notified framework itself is now in question. Contemporary reporting confirms that the notified regime contemplated an immediate shift of existing registered prosumers from net-metering to net-billing, with export credits restricted to one month rather than three and the seven-year term otherwise continuing until expiry, at least on NEPRA’s public narrative.
The political executive then intervened at speed. Publicly available reporting indicates the Prime Minister took notice and directed the Power Division to move NEPRA for protection of existing contract-holders, signalling a recognition at the highest level that retroactive impairment of settled consumer arrangements carries serious governance and credibility costs. Consistently with that direction, subsequent reporting records that the Power Division filed a review petition with NEPRA, expressly referencing the need to protect approximately 466,000 existing net-metering users while also addressing the distributive concern that non-solar consumers should not unfairly shoulder fixed-cost burdens.
Most consequentially, NEPRA itself has published a draft amendment (for public opinion under section 47(3) of the 1997 Act) which proposes to replace Regulation 21(2) so that approvals, licences, concurrences, and agreements executed under the repealed 2015 framework remain billed “in accordance with rate and mechanism provided in the repealed regulations till the expiry of the term”, and it adds a deeming clause that this protective provision “shall be deemed to have taken effect on 9th February, 2026 and shall always be deemed to have had effect accordingly.”
That deeming language matters more than it may appear at first glance. It is a classic legal technique to reduce exposure to challenge by presenting the amendment as a clarification that was “always” the law since the date of the S.R.O. In practical terms, it is also an implicit acknowledgement that the earlier drafting of Regulation 21(2), which appeared to switch existing contracts to the new billing methodology, was legally vulnerable, commercially destabilising, or both.
Finally, the amendment process itself is being scrutinised. As of early March 2026, stakeholders have publicly pressed NEPRA to adopt a transparent consultative process and issue a reasoned “speaking” determination addressing the objections received, arguing that notifying the Regulations within days of the public hearing without a reasoned treatment of submissions undermines due process and increases litigation risk. This is not mere optics: where a statutory authority invites objections and conducts hearings, failure to show meaningful consideration can become a justiciable defect under administrative law principles.
Bottom line: the Regulations are presently “in force”, but the combination of executive intervention, a pending review, and NEPRA’s own draft amendment means the regime is not settled. For litigants and advisers, this creates both an opportunity and a caution: opportunity because the State’s own conduct supports arguments of legal vulnerability; caution because courts may prefer to allow the regulator’s review process to conclude before granting sweeping relief, unless irreparable harm can be shown.
A Note on Constitutional Risk
While tariff policy is ordinarily afforded deference, abrupt retroactive alteration of the economic core of existing prosumer arrangements can raise constitutional questions. Article 18 (freedom of business) is engaged where regulatory change disproportionately disrupts a settled market absent staged transition and reasoned justification. Article 24 may be implicated where subordinate legislation materially deprives an installed asset of its expected contractual value without clear legislative authority. The point is not to constitutionalise tariff disputes, but to insist that regulatory power be exercised lawfully, transparently, and with fair dealing.
NEPRA’s draft amendment to Regulation 21(2) and the executive review process are likely to be pivotal in determining whether the regime stabilises through consultation, or is ultimately tested in constitutional jurisdiction.