Discos's miraculous second half recovery
What truly deserves a double take is what transpired in the second half of FY25. According to the Power Minister, recoveries surged to 96.06 percent for the full year — up from a modest 92.02 percent at the end of December 2024. That's a lot of ground covered in just six months. Some might even call it… magical.
To put things into perspective: at the halfway mark of the fiscal year, discos had billed Rs3.12 trillion and collected Rs2.87 trillion — a shortfall of Rs249 billion. And then, in the remaining six months, they somehow managed to collect Rs117 billion more than what they billed. In other words, the second half of FY25 witnessed over 100 percent recovery. Approximately 3 billion units' worth of 'extra' collection materialized. Remarkable, no?
Of course, consumption patterns, seasonal variations, and tariff structures differ across fiscal halves — that much is fair. But historically, it is the second half that has contributed the lion's share of inefficiency losses — about 60 percent in each of the past two years. That this trend reversed so dramatically in FY25, and with lower effective tariffs in Q4 no less, is a statistical curiosity.
The Minister also claimed the recovery was the highest in history. Not quite. FY21 still holds the title at 97 percent. So while the recovery this year may be impressive, it's not unprecedented. Unless, of course, we're using a new definition of "record-breaking."
Now, if the recovery side of DISCO inefficiencies is truly turning a corner — that would be welcome news. But for now, let's just say we await Nepra's State of Industry Report for a little more. Whenever it arrives.
The second half of the inefficiency equation — Transmission & Distribution (T&D) losses — tells a different story. Here, performance has remained stubbornly poor. The T&D loss rate is still hovering close to 18 percent — miles away from Nepra's target of 11.4 percent. In financial terms, the 'improvement' has been a mere Rs10 billion. Hardly worth framing.
Worse still, the gap between allowed and actual T&D losses is now the widest in recent memory. Over the last seven years, losses have moved within a tight band — and not in a good way. There has been little meaningful progress despite ambitious targets and consistent tariff adjustments.
And let's not forget — these calculations only account for losses above the allowed threshold. The rest are already priced into consumer tariffs. So, every extra percentage point of inefficiency is a direct transfer from taxpayers and bill-payers to system leakage.
In sum: one half of the disco loss problem appears to have undergone a miraculous transformation — or so we're told. The other half continues to underwhelm. Until both parts of the puzzle are fixed — with transparency and structural reform rather than spin — the sector's chronic inefficiencies will remain business as usual.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
6 hours ago
- Business Recorder
KE's two-decade journey: a privatisation that delivered—II
When discussing KE's generation portfolio, it's important to recognize that both private and public sector utilities operate within a regulated environment. Any investment in generation requires NEPRA's approval and must align with the Government of Pakistan's energy policies. In recent years, KE has been advised to off-take power from the national grid due to surplus available in the national grid —leading to the abandonment of KE's several planned power plants including the 700MW coal project. Ironically, the same critics who urge KE to tap into central capacity often also call for greater self-generation by individual consumers, without acknowledging the inherent contradiction in these demands. KE's two-decade journey: a privatisation that delivered—I Misunderstandings further persist and KE's write-offs for unrecoverable bills often draw headlines about 'double benefits.' Yet the mechanism is neither novel nor opaque: regulated utilities the world over recognise prudent costs after exhaustive audits. Any recoveries that later materialise are netted off in future filings. Similarly, in the case of alleged claw-back amounts that are currently before the court, KE disputes only the interpretation, not the formula nor the principle, and will comply with whatever the honorable court decides. On matters of safety, it is important to clear facts. For FY2023, Nepra investigated 33 electrocution-related incidents in KE's jurisdiction. What critics easily ignore is the fact that in 32 of these, the authority found no negligence on KE's part. Many of these incidents occurred within consumer premises or involved third-party encroachments, underscoring the shared nature of safety responsibility in dense, urban environments, most of which is outside KE's purview. Talking about captive plants and RLNG imports, one must ask: where were these critics when the entire country had to rely on costlier fuel because of captive preference? Every power plant must be backed by a secure fuel supply, and in the absence of local gas, KE did what was necessary to keep the city running. Now when the ministry has instructed captive to move back on the grid, concerns have been raised about KE charging a 'hefty fee' to convert captive plants to grid supply. It's important to understand that these costs are not arbitrary charges but are aligned with NEPRA-approved regulations and technical requirements. When a captive generation facility transitions to grid supply, it often requires dedicated infrastructure; new metering, protection systems, reinforcement of the nearest grid point and in fact a new grid to be set up in some cases; all of which involve material costs. These investments are necessary to ensure grid stability, safety, and quality of supply for both the industry and surrounding consumers. Moreover, KE does not profit from these charges. They are calculated based on actual technical scope and verified through internal and third-party checks. Where complaints have been raised, KE has reviewed them and wherever required, streamlined the process, reduced costs through engineering alternatives, or offered installment-based facilitation. It's also worth noting that as fuel prices for captive plants have increased, many industries are now returning to grid power voluntarily, recognizing that stable, merit-order-based electricity is both more economical and less administratively burdensome in the long run. What often gets overlooked in these debates is that privatization alone is not reform. The government may have privatized one utility, but it has not yet deregulated the power sector. True transformation will only come when the entire ecosystem — generation, transmission, and distribution — is opened up to competition under a non-exclusive licensing regime. Until then, companies like KE are expected to deliver world-class service while operating in a regulated environment. The push for CTBCM and market liberalization is the right direction, but it needs acceleration. The real innovation lies not in hardware-heavy prescriptions from the 1980s, but in building service-driven utilities that operate like customer-centric platforms, capable of adapting to how people live and consume electricity today. That shift is already underway. From renewables and smart meters to apps like KE Live, the modern utility is no longer just a wire-and-pole provider—it's a digital service partner. Customers today need electricity that adapts to their lifestyle—whether it's battery backup during unconventional hours, or real-time usage insights delivered through mobile platforms. KE has already laid the groundwork with its digitized network, underground infrastructure, and 24/7 digital engagement channels. Globally, utilities are diversifying — delivering internet through fiber over power lines, offering flexible, time-based supply models, and using AI to manage load and service reliability. KE's model reflects that evolution. Encouragingly, the Power Division and the Special Investment Facilitation Council (SIFC), are actively driving reforms in this direction, and a future built around deregulation, customer choice, and smarter service is no longer a distant concept—it is within reach. And when it comes, K-Electric is ready—with the infrastructure, digital capability, and vision to thrive in a truly competitive, service-oriented power sector.—Concluded Copyright Business Recorder, 2025
Business Recorder
6 hours ago
- Business Recorder
Pakistan's power sector held captive, now there are signs of breaking loose
In Pakistan's complicated energy sector maze, a quiet battle has had the government and industries engaged, one that pits the struggling national grid against captive power plants (CPP). The arrangement came under scrutiny by the International Monetary Fund (IMF), and some progress has been made. Captive power plants, set up by industries that took advantage of natural gas at cheaper rates, have now been penalized, so to speak, with a levy that make them more expensive than the grid in some cases. Industries operating on CPPs have resisted integration with the national grid – already operating in surplus capacity – and this results in soaring fixed costs per unit, tightening the noose on an already strained system. These off-grid power generation units have long operated under the radar of national power planning. But as Pakistan's grid struggles with underutilization, subsequently rising capacity payments, and decreasing demand – falling by over 5% in FY-2024 – CPPs have rightfully drawn increased scrutiny from policymakers. The struggle between captive power and the national grid isn't just technical – it's rooted in distrust, economics, and survival. In the past, where power outages could shut down entire production lines, industries did what they had to: they took matters into their own hands. Out of Pakistan's 1,180 captive plants, majority are dedicated with very few serving as co-generation plants which export surplus energy to the grid. This grid, which is capable of supplying over 45,000 MW, faces a demand shortfall of over 3,000 MW because of these CPPs alone, an estimate by NEPRA, making these plants one of the largest informal sources of electricity in the country. While CPPs serve industrial needs, their unregulated growth creates problems for the broader power sector. The government and NEPRA have grown increasingly critical of captive generation, particularly in the context of excess capacity and rising capacity payments – payments to independent power producers (IPPs) for unused electricity. Moreover, inefficiency and high gas consumption stagnate the power sector. By supplying gas to these inefficient plants, more efficient grid plants are deprived of their fair share – thereby relying on expensive RLNG – which further impacts the tariff. Most CPPs in Pakistan operate at around 30% efficiency, much lower than modern grid-connected power plants, which can exceed 50% efficiency. This means CPPs consume more gas per unit of electricity generated, resulting in wasteful use of a scarce resource. Two-fold issues let this situation run amok. Initially, the policymakers turned a blind eye on captive power as they lowered industrial complaints and kept industries energized to maintain Pakistan's sluggish economic growth. On the other hand, policymakers kept growing capacity – assuming demand would grow, but a large chunk of industrial demand never showed up because those users were still running their own power plants. This has resulted in a vicious cycle hampering the grid – exacerbated by the policymakers repeating their mistakes with net-metering and solarization. Recognizing this cycle, the government has begun taking steps to discourage captive generation and incentivize industries to return to the grid. The biggest step was the withdrawal of gas for captives. Starting in 2021, only those with efficiency above 50% were allowed to continue operations with subsidized gas. By March this year, the government sharply increased gas prices for CPPs – by up to 23% – and imposed a new grid levy, raising costs to bring their generation costs on par with grid generation costs. The government also mandated industries to maintain dual connectivity with the grid and demonstrate they can switch to grid supply during peak hours with proposals to impose surcharges or wheeling charges on self-generation, especially if they are connected to the grid only as backup. Pakistan's total installed capacity stands at over 45,000 MW, but peak demand rarely crossed 30,000 MW in 2024. That is almost 15,000 MW of excess capacity being charged to consumers – a monstrous Rs2 trillion being excessively charged to consumers in 2024, over 60% of total electricity sector costs. Additionally, these industries – those that had the clout to install big CPPs – rendered other local players uncompetitive, inserting a layer of incentives to dump goods in the local market rather than exporting them. Still, captives are wary of switching to the grid. Their consumption patterns require dedicated sub-stations – as per NEPRA's regulations – which incur a significant cost to develop. Concerns on voltage fluctuations remain while inconsistent policies also hinder CPPs from folding into the grid. Moreover, most firms have already invested millions in CPPs. For them, switching to the grid offers only additional financial outflows – the cost of developing the necessary grid connections requiring a substantial investment of Rs 2-4 billion. But it seems like Pakistan is getting ready to shift industries to the national grid. Coordination and collaboration will be key. Assurances of grid stability, uninterrupted power supply, and facilitation during the transition are going to be key.
Business Recorder
6 hours ago
- Business Recorder
Industrial power tariff: Power Div, APTMA at odds over cross-subsidy calculation
ISLAMABAD: The Power Division and the All Pakistan Textile Mills Association (APTMA) appear to be at odds over the actual volume of cross subsidy embedded in industrial power tariffs, with APTMA claiming that the burden is nearly twice what the Power Division reports. The dispute emerged at a time when the Power Division claims it is engaging with the industry to further reduce cross subsidies to ease the financial strain on industrial consumers. The Division had earlier announced a reduction of Rs 174 billion in cross subsidies. 'We do not agree with the Power Division's calculation of Rs 74 billion in cross subsidies in industrial power tariffs,' stated Shahid Sattar, Secretary General of APTMA, in a letter addressed to Power Minister Sardar Awais Khan Leghari. 'According to our analysis based on Nepra's determination of consumer-end tariffs for FY26, the actual cross subsidy amounts to at least Rs 137 billion.' PD uncertain on power tariff changes from July 1 APTMA defines cross subsidy as the difference between a consumer's cost of service, which includes generation, transmission, distribution, and associated margins, and the effective price charged by the government of Pakistan. Under Section 31(4) of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997, Nepra is mandated to determine a uniform tariff for public sector licensees in the interest of consumers. The National Electricity Policy 2021 also allows the government to propose uniform tariffs across consumer categories based on socioeconomic objectives, budgetary targets, and regulator recommendations. According to APTMA, power tariff determination results in two sets of tariffs: one determined by Nepra, which reflects the true cost of service across consumer categories, and another proposed by the government, which applies cross subsidies. Nepra's tables show that residential users consuming up to 300 units and non-ToU agricultural consumers are charged below-cost tariffs. In contrast, other consumer categories, including industry, pay higher-than-cost tariffs to cover the resulting revenue gap—effectively bearing the cross subsidy burden. 'Our calculations, using category-wise consumption data from the FY25 determination (due to lack of FY26 data), indicate a cross subsidy of nearly Rs 140 billion in industrial power tariffs. This figure may rise by 2–3% based on CPPA-G's projected demand growth for FY26,' APTMA noted. APTMA suggests that the Power Division's Rs 74 billion figure likely uses an average system-wide benchmark—such as the FY26 Power Purchase Price (PPP) of Rs 25.98/kWh—instead of Nepra's cost-reflective tariffs by category. Based on this method, APTMA acknowledges the cross subsidy may drop to around Rs 85 billion, closer to the government's estimate. However, APTMA insists the cross subsidy should be calculated against actual cost of service per consumer category, not a generalised average. 'If the goal is to deliver cost-reflective and competitive power tariffs, it's critical that government and stakeholders align on definitions and calculation methodologies.' APTMA reiterated its long-standing demand for a regionally competitive power tariff of 9 cents/kWh. This demand, it says, is supported not only by regional benchmarks (5–9 cents/kWh) but also by domestic cost-of-service studies that show tariffs for 83–84% of Pakistani consumers' hover around 9 cents/kWh. Nepra's own determination supports this, with industrial base rates set at Rs 21.65/kWh (off-peak) and Rs 30.76/kWh (peak) for July 2025, equating to roughly 9.5 cents/kWh before applying cross subsidies. On the issue of wheeling charges, APTMA argues that the current rate of about 4.5 cents/kWh undermines the viability of the Competitive Trading Bilateral Contract Market (CTBCM) for renewable energy. For a textile unit operating three shifts, only 20% of its energy demand can be met at a viable rate (~8 cents/kWh) through wheeling. The remainder must be sourced from the grid, where marginal costs—particularly from RLNG plants—total around Rs 37.79/kWh (or 13.4 cents/kWh), resulting in an average energy cost of 12.32 cents/kWh, significantly above the industry's target. APTMA emphasised the need for tariff predictability, which is crucial for long-term business planning. Volatile rates pose major challenges, particularly for exporters. The Association urged the Power Minister to reconsider wheeling charges and allow hybrid consumers (those using both CTBCM and grid power) to retain access to the industrial tariff, enhancing predictability and competitiveness. APTMA also acknowledged the government's new incremental consumption package, calling it a 'substantial improvement' over previous schemes, which were complex and impractical for industry adoption. 'We appreciate that industry feedback is now being actively considered in policy design,' the Association added. On the topic of industrial Time of Use (ToU) tariff reform, APTMA said it has recently engaged with Abid Lodhi and Naveed Qaiser at PPMC. 'They outlined several system constraints, and we are now developing a proposal for a more flexible ToU tariff structure, which we plan to submit in the coming weeks,' said Sattar. Copyright Business Recorder, 2025
