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Business Recorder
25-06-2025
- Business
- Business Recorder
MYT mechanism: Nepra lowers average tariff to Rs34 for Discos
ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) has reduced national average tariff by 4.2 percent to Rs 34 per unit from Rs 35.50 per unit of 2024-25 for power Distribution Companies (Discos) for FY 2025-26 under Multi-Year Tariff (MYT) mechanism to be applicable from July 1, 2025. The Regulator has determined separate tariffs for the Discos based on their approved revenue requirements, which also includes Power Purchase Price (PPP). However, it is unclear if the Discos or GoP will approach the Regulator for review of determinations. NEPRA approves K-Electric's MYT for supply segment The determined average tariffs of different Discos are as follows: (i) Islamabad Electric Supply Company (IESCO)- average tariff Rs 29.28/kWh, revenue requirement, Rs 340.523 billion, PPP tariff, Rs 23.9851/kWh, total PPP amount Rs 300.896 billion;(ii) Gujranwala Electric Power Company (GEPCO), average tariff Rs 33.82/kWh, revenue requirement, Rs 380.412 billion, PPP tariff Rs 29.9231/kWh, total PPP amount Rs 319.942 billion;(iii) Faisalabad Electric Supply Company (FESCO), average tariff Rs 32.69/kWh, revenue requirement Rs 471. 717 billion, PPP tariff 26.0226/ kWh, total PPP amount Rs 408.406 billion; (iv) Lahore Electric Supply Company (LESCO) average tariff Rs 31.18/kWh, revenue requirement Rs 737.216 billion, PPP tariff Rs 25.1463/kWh, total PPP amount Rs 650.996 billion; (v) Multan Electric Power Company (MEPCO), average Rs 34.68/kWh, revenue requirement, Rs 595.696 billion, PPP tariff Rs 26.5094/kWh, total PPP amount Rs 513.580 billion; (vi) Peshawar Electric Supply Company (PESCO), average tariff Rs 37.20/kWh, revenue requirement, Rs 342.268 billion, PPP tariff Rs 26.1682/kWh, total PPP amount Rs 298.213 billion; (vii) Quetta Electric Supply Company (QESCO), average tariff Rs 41.54/kWh, revenue requirement, Rs 201.644 billion, PPP tariff Rs 29.8509/kWh, total PPP amount Rs 168.115 billion: (viii) Sukkur Electric Supply Company (SEPCO), average tariff Rs 35.63/kWh, total revenue requirement, Rs 120.739 billion, PPP tariff Rs 27.213/kWh, total PPP amount Rs 110.213 billion; (ix) Hyderabad Electric Supply Company (HESCO), average tariff Rs 44.36/kWh, revenue requirement, Rs 173.408 billion, PPP tariff Rs 32.6312/kWh, total PPP amount Rs 173.408 billion; (x) Tribal Areas Electric Supply Company (TESCO), average tariff, Rs 44.93/kWh, revenue requirement, Rs 61.391 billion, PPP tariff Rs 39.3703/kWh, total PPP amount Rs 59.045 billion ; and (xi) Hazara Electric Supply Company (HAZECO) average tariff, Rs 33.49/kWh, revenue requirement, Rs 74.532 billion, PPP tariff Rs 24.0776/kWh, total PPP amount Rs 63.340 billion. NEPRA has projected a modest 2.8% growth in electricity demand for the fiscal year 2025-26, significantly lower than the 5% forecast made by the Central Power Purchasing Agency-Guaranteed (CPPA-G). This projection is based on recent trends of stagnant or declining demand, as actual generation data for the last two fiscal years showed either negative or flat growth. In its latest determination, NEPRA approved a projected average Power Purchase Price (PPP) of Rs 25.06 per unit for FY 2025-26. This estimate is based on several macroeconomic assumptions, including an exchange rate of Rs 290/USD, low hydrology, US inflation at 2%, KIBOR at 11%, and Pakistan's inflation at 8.65%. Nepra acknowledged that although CPPA-G initially based its forecast on an exchange rate of Rs 280/USD, the Federal Government's budgetary estimates and prevailing market conditions justify the use of Rs 290/USD. As the majority of power generation costs are dollar-indexed, exchange rate fluctuations have a direct impact on electricity prices. The Authority, in its determination observed that during hearing various stakeholders highlighted that exchange rate of Rs.280/USB may not be realistic and may result in positive periodic adjustments as the prevailing exchange rate is already higher. It was also highlighted by one of the commentators that Federal Government in budgetary estimates has considered exchange rate of Rs.290/USD. The Authority also noted that 3 month KIBOR as of June 2025 has remained lower as compared to the projections of CPPA-G and may reduce further going forward. In view thereof, the Authority directed CPPA-G to also submit a PPP forecast scenario, by taking into account exchange rate of Rs.290/USD and KIBOR @ 11%, with following other assumptions; CPPA-G in its Report has projected growth under two scenarios, ie, normal 2.8% and high 5%, however, actual demand during last two years either decreased or remained stagnant. For FY 2023-24, the overall generation is reduced by around 1.79% as compared to FY 2022-23 and for FY 2024-25 (May & June 2025 projected), total generation is expected to remain almost at the same level as of FY 2023-24. To analyse the projections made by CPPA-G, the actual generation data from July 2024 to April 2025 has been considered. The actual generation from the Grid remained at 100,660 GWhs, from July 2024 to April 2025, lower by 5.40% from the reference generation assumed in PPP projections for the FY 2024-25. This reduction of 5.40%, when applied to the projected generation for May and June 2025, results in total generation of around 125,930 GWHs from the Grid. After accounting for the increased supply to KE from national Grid in FY 2025-26, and by applying the growth rate of 2.8%, as proposed by CPPA-G in one of its growth scenarios, the projected generation works out as 132,247 GWh, which when adjusted with Transmission losses, results in demand of 128,544 GWhs at 132 KV. CPPA-G in its Report has also projected similar demand at 132 kV, however, reliance was placed on the anticipated shift of captive consumers to National grid and improved economic situation. The improved economic situation, although may lead to additional electricity consumption, however, keeping in view increasing penetration by DGs and past trends, the Authority considered demand growth of 5%, assumed by CPPA-G as ambitious, and unlikely to happen. Copyright Business Recorder, 2025
Business Recorder
25-06-2025
- Business
- Business Recorder
Power tariffs: PPP sets base for tariff changes
As NEPRA gears up for the next round of base tariff revisions, it has released the revenue requirements for power distribution companies—anchored in the Power Purchase Price (PPP) projection submitted by the Central Power Purchasing Agency (CPPA). Developed in consultation with the Power Division and other stakeholders, the PPP for FY26 is marginally lower than last year. But with the total revenue requirement still hovering around Rs4 trillion—virtually unchanged—any hope for relief in end-user tariffs now rests squarely on government subsidies. The CPPA's PPP projection originally offered seven scenarios—each based on different assumptions for electricity demand, rupee-dollar parity, fuel prices, and hydrology. NEPRA, however, requested an eighth set, which ultimately formed the basis for the FY26 PPP. This scenario assumes a modest 2.8 percent growth in demand over actual generation during July–December 2024, an exchange rate of Rs290 to the dollar, and fuel prices under standard conditions. Most notably, NEPRA has chosen to adopt low hydrology as the base case—a critical assumption that heavily influences overall power purchase costs. The relief may be modest, but it's still a milestone—marking the first time in years that the year-on-year change in PPP has turned negative. For context, Pakistan's electricity PPP has doubled over the past five years, despite a noticeable shift towards a more efficient generation mix. A key contributor to the recent easing is the Rs100 billion in savings secured through the renegotiation of Independent Power Producer (IPP) contracts. Breaking it down, 63 percent of the Rs25.98/unit PPP stems from capacity charges, while the energy component hovers around Rs9/unit. Factoring in the allowed 11 percent transmission and distribution (T&D) losses pushes the effective PPP to Rs29.6/unit. Add to that Rs3.3/unit for the wire business margin, Rs0.56/unit for distribution margin, and Rs0.49/unit in prior year adjustments—and the total revenue requirement for DISCOs lands at Rs34/unit. Unlike in FY23, the reference generation mix for FY26 aligns more closely with ground realities, with thermal generation now assumed at 27 percent—down from 32 percent last year. Hydel output is projected at 35.9 billion units, roughly 10 percent lower than FY24, priced at an average of Rs12/unit. NEPRA notes that the projected reduction also accounts for emerging concerns over India's upstream water control—factored in as a risk to hydrology. Nuclear power maintains a 19 percent share in the generation mix for the second consecutive year, priced at Rs17.5/unit—driven largely by the highest capacity charge among all sources, exceeding Rs450 billion. Imported coal continues to be the system's most expensive burden, with a punishing unit cost of Rs61 and a meagre 7 percent generation share. Its capacity charges, at Rs428 billion, are nearly on par with hydel's. Solar, meanwhile, comes in around the system's average, priced at approximately Rs26/unit. All of this assumes average T&D losses of 11 percent—translating to nearly Rs170 billion effectively vanishing into the circular debt black hole. Unlike K-Electric, no recovery allowances have been granted to discos, with recovery targets still pegged unrealistically at 100 percent. That means under-recoveries could mirror T&D losses, adding yet another layer to the circular debt pile. Meanwhile, the Debt Servicing Surcharge (DSS) remains in place—ensuring that honest bill payers continue to foot the bill (for next six years at least) for past loans taken in the name of clearing circular debt, even as fresh debt quietly accumulates.
Business Recorder
16-06-2025
- Business
- Business Recorder
Power sector—hope on the horizon
Over the past year, power tariffs in Pakistan have come down considerably and, contingent on key reforms being implemented over the next five years, are on their way to becoming 'normal' by global standards. As highlighted in a recent IEA report, power tariffs in Pakistan are almost twice as high as in most of the world. Behind this are a multitude of reasons, ranging from a high share of stranded capacity, high technical and commercial losses, cross subsidies and other economic distortions that have kept power tariffs prohibitively high and subdued demand, contributing to a utility death spiral, and most recently a solar boom that threatens the viability of the national grid. While power tariffs have been brought down significantly over the past two years, it's important to point out that they're back around the pre-crisis levels of 2021-22 which were not very competitive to begin with. They spiralled from around 10-12 cents/kWh to 16-17 cents/kWh in the wake of the economic crisis of 2022-23; as the economy has adjusted some demand has recovered (though still below 2020-21), while international developments have also kept fuel prices at a low. Hence, the reduction in power tariffs has been brought about by a combination factors, including economic recovery, and a targeted subsidy with sunset clause. The only 'structural' or long-term sustainable change has been the termination and renegotiation of 1992/2002 policy IPP contracts, which brought about a relief of Rs 16 billion and Rs 17 billion in the third quarter of FY25. This translates into an annual reduction of around Rs 120 billion in total capacity charges of Rs 2.27 trillion (based on FY25 Power Purchase Price determination)—an impact of negative Rs 0.92/kWh in the average power purchase price. Some relief is also planned to be financed through the Grid Transition Levy on captive power plants, though it's unclear how the government expects to raise funds from the captive levy while simultaneously shifting them to the grid and 'eliminating captive power usage from the gas sector' in IMF agreement lingo. Except little to no relief from this front, especially as captive gas consumption was down by ~90 percent YoY in April 2025. The reduction brought about by negative QTAs over last few quarters, primarily through the IPP termination/renegotiation and CPP transition, will be embedded into the base tariff as part of cost and demand projections for next year. Considering these factors, and the CPPA Power Purchase Price projections, which range between Rs 24.75-26.70/kWh compared and Rs 27/kWh for FY25, it is safe to assume that power tariffs will be rebased to around where they are at present. Considering all these dynamics, any further reduction in power tariffs beyond current levels is unlikely without systemic overhauls. The good news is that the IMF Staff Report outlines a few such corrections that are now in motion. However, the way some energy sector policies—particularly the captive-to-grid transition—have been implemented over the past year raises serious concerns about transparency, adherence to the rule of law, and a troubling reliance on the notion that the ends justify the means. Two measures that are likely to have a substantial positive impact on power tariffs are restructuring of the power sector circular debt and rewiring of energy subsidies mechanism for low-income groups. Circular debt has been a major issue not only because the debt servicing cost has been a significant contributor to prohibitive power tariffs, but also because it is a major hindrance to broader power and energy sector liberalization. Investors don't want to buy debt ridden entities, and as consumers fall off the grid who will service the debt? Conversion of up to 80% CD stock to CPPA debt at a favourable rate and plan to clear it by FY31 is hence a very positive development. While lifting of the cap on the debt servicing surcharge as a contingency measure has attracted some criticism, it should not need to be increased above the 10 percent of revenue requirement level if all goes well, and the Rs 3.23/kWh surcharge (at present) can be eliminated over the next 5 years. Removal of cross subsidies from power tariffs by FY27 is another very significant correction. Power tariffs across different consumers are highly distorted through cross subsidies, where high-end consumers—i.e., those with a high propensity to consume and ability to pay—are made to subsidize the consumption of lower-income consumers. First, not only does this significantly inhibit the demand of 'good' consumers—industrial, commercial and residential—and create a significant incentive for them to move off the grid, the poorly designed and administered system has led to widespread abuse of the protected and lifeline tariffs, and theft under the guise of subsidized consumption. There are numerous instances of a single household having multiple power meters to avail protected tariffs, and with massive proliferation of off-the-grid solar, more and more middle-to-high-income consumers are becoming eligible for low-consumption-based protected tariffs, the cost of which is again borne by the good consumers, furthering the utility death spiral. In addition to the cross subsidy, it also costs the government over Rs 1 trillion annually through the tariff differential subsidy. Under the Resilience and Sustainability Facility, the government has committed to reforming the energy subsidy system to 'reduce incentives for overconsumption, wasted energy, and incentives for theft and losses.' In FY27, the country can expect a simplified power tariff structure without cross subsidies, and power subsidies for low-income consumers moved to the Benazir Income Support Programme, where they rightfully belong. Communication campaigns around this should be starting within a few weeks, consumers will be identified and verified by early 2026, a rebate mechanism will be defined by mid-2026, and the first rebates should start going out from early 2027. The government is also moving forward with other key reforms, including addressing distributional efficiencies through privatization of DISCOs, improving the transmission system through restructuring of NTDC, and privatization of inefficient GENCOs. Some progress has also been made on the Competitive Trading Bilateral Contracts Market (CTBCM). The proposal for a Rs 28.45/kWh (10.2 cents) wheeling charge has been rationalized to Rs 12.55/kWh (4.5 cents) + bid price, comprised of Rs 3.23 debt servicing surcharge, Rs 3.47 cross subsidy, Rs 2.34 distribution margin, Rs 1.45 use of system charge, and Rs 2.06 in losses. Revenue generated through bidding above the base price will be contributed to the grid in lieu of stranded costs. The indicative plan is to operationalize the competitive market with a cap of 800MW to be allocated over 5 years. If the government succeeds in reforming the power subsidy and clearing the CD stock, the wheeling charge will come down to Rs 9.08/kWh (3.3 cents) by FY27, and Rs 5.85/kWh (2.1 cents) by FY31. However, it is important to note that the 4.5 cents/kWh base price is still two to three times the 1.5-2 cents/kWh wheeling charge that is financially viable for industrial operations. Considering the generation tariffs of IPPs and GPPs, a wheeling charge of 4.5 cents/kWh takes the final price above the grid tariff of ~11 cents/kWh, leaving little to no incentive for industries to shift to the competitive market. While a key objective of the CTBCM has been to transition industrial bulk power consumers to a competitive market where they can avail power at regionally and internationally competitive prices, operationalizing CTBCM at Rs 12.55/kWh + bid price risks low to no participation from industrial consumers and the bulk of the capacity going to BPCs like housing societies whose load is non-productive in nature and does not create an economic multiplier like industry. Hence, the government must reconsider whether it wants to go this route. Looking at these rosy reforms, one must also not forget the grim reality of the grid transition levy on captive power consumers. While the objective of shifting inefficient gas generators to the grid is appreciable, the blanket application of a purposefully miscalculated and 'contrary to the law' levy is counterproductive and significantly undermines confidence in the broader reform agenda. Gas price for captive was raised to Rs 3,500/MMBtu, RLNG equivalent, in February 2025, which brought the cost of captive generation at par with the grid. Imposition of an additional levy, based on the peak industrial tariff applicable for 4/24 hours a day, under-assumption of captive generation costs, and inclusion of unrelated frivolous charges, contrary to the methodology specified by law, has led to undue penalization of efficient facilities like combined heat and power cogeneration plants. Captive cogeneration plants are an international standard for industries requiring a stable and high quality of power supply and contribute to lower emissions to meet shifting buyer preferences. The 2021 CCoE decision that has been used as a basis for transitioning CPPs to the grid specifically exempted cogeneration facilities, and the spirit of this decision should be maintained by reclassifying cogeneration captive to the industrial power tariff category. Beyond cogeneration, many captive consumers who have shifted to the grid are facing major challenges related to quality of supply. Industrial units across the country, but especially in Southern DISCOs, are regularly experiencing repeated tripping and severe voltage fluctuations, and feeders are burning out, causing damage to expensive equipment and operational disruptions. The forced transition to grid was premature in this regard. While the power division has advocated signing of Service Level Agreements, these provisions should be embedded into the Consumer Service Manual, and top-quality supply must be ensured for all power consumers across the board. There are additional measures worth serious consideration. First, the government should reconsider its approach to incentivizing additional consumption. Another incremental package priced at Rs. 20–25/kWh is reportedly in the works, but the last such initiative—with its convoluted conditions and limited uptake—fell short of expectations, particularly for industry. A better approach would be to expand the Time-of-Use tariff regime, introducing more slabs priced at marginal cost. A deeply discounted night-time tariff for 3-shift-industries, for instance, would offer clarity and real value to consumers while driving up utilization of idle capacity far more effectively than the stopgap incentives tried so far. Second, the Discos' outdated consumer databases—which are often not reflective of sanctioned or actual loads, or the corresponding security deposits—must be updated. Doing so would enable proper recalibration of security amounts, injecting much-needed liquidity into the sector, and also help resolve many underlying mismatches and disputes between consumers and utilities. In conclusion, while the horizon is finally beginning to show signs of light, the path to a sustainable, competitive, and equitable power sector hinges on transparent implementation, lawful policymaking, and a clear commitment to reform that prioritizes long-term efficiency over short-term optics. The proactive role of the Power Minister and his team in pushing fundamental corrections is highly appreciated—but the challenge now is not just to promise change, but to make sure that it sticks. Copyright Business Recorder, 2025
Business Recorder
17-05-2025
- Business
- Business Recorder
Ready to help build robust framework: APTMA questions Nepra's tariff-setting capacity
ISLAMABAD: The All Pakistan Textile Mills Association (APTMA) has questioned the capacity of National Electric Power Regulatory Authority (Nepra) to formulate power tariffs and offered to assist in developing a framework that is technically robust, economically just, and strategically aligned with Pakistan's development objectives. The intervention comes at a time when Nepra is reviewing the assumptions submitted by the Power Division and the Central Power Purchasing Agency-Guaranteed (CPPA-G) for finalizing the Power Purchase Price (PPP) for FY 2025–26. Aptma's letter to Nepra was issued amid widespread criticism from the business community, which contends that the assumptions behind the proposed tariffs are disconnected from economic realities. The letter highlights several overlooked market dynamics that directly affect the credibility and sustainability of the proposed PPP forecasts. Peak-hour power tariff: APTMA urges govt to share constraint details Key issues raised include the shift from captive power to the national grid, a significant reduction in grid demand due to the rise in behind-the-meter and rooftop solar photovoltaic (PV) systems, unrealistic international fuel price projections, and systemic inefficiencies. Aptma specifically criticized CPPA-G's projected electricity demand growth of 2.8% to 5% for FY 2025–26, calling it disconnected from sectoral realities. According to Aptma, the rapid uptake of solar PV—driven by high grid tariffs, load shedding, declining installation costs, and the competitive Levelized Cost of Energy (LCoE)—has fundamentally altered demand patterns. In 2024 alone, over 17 GW of solar PV modules were imported, with approximately 15 GW now operational and generating an estimated 21.9 TWh annually—equivalent to 14% of national electricity consumption. Despite this major development, CPPA-G's model makes no reference to solar net metering or the impact of rooftop PV generation. 'Load dips during peak solar hours and reverse power flows have become common across DISCOs, yet the PPP model remains static and fails to reflect this systemic disruption,' Aptma stated. The association warned that ignoring BTM generation could lead to miscalculating idle capacity costs and accelerating grid defection. Aptma also flagged concerns over the inequitable industrial tariff structure. It argued that high-voltage consumers—who maintain their own infrastructure and cause minimal technical losses—are charged higher per-unit rates than lower-voltage users (B2 category), in violation of cost-of-service principles under Section 31(2)(f) of the NEPRA Act. This pricing mismatch, Aptma noted, is incentivizing industries to split their loads into multiple low-voltage connections to escape punitive tariffs. The result is distorted demand patterns, inflated low-tension (LT) losses, and poor forecasting accuracy—contrary to Competitive Trading Bilateral Contract Market (CTBCM) principles. APTMA criticized the application of fixed charges based on 25% of sanctioned load or actual Maximum Demand Indicator (MDI), whichever is higher. This approach can inflate effective tariffs by Rs. 5–13/kWh for underutilized industries. It recommended aligning fixed charges with actual recorded demand and called on NEPRA to standardize the treatment of MDI-based charges to enhance transparency and competitiveness. Fuel price assumptions were also deemed outdated. CPPA-G based its model on a Brent crude price of $72–74 per barrel. In contrast, Goldman Sachs and JPMorgan have projected price of $56–$66 per barrel for 2025–26, citing weaker global demand and increased OPEC+ supply. Aptma recommended using $60 as a central assumption, with a downside scenario of $56, aligned with data from Platts and Argus. The letter further criticized the lack of transparency in the modeling of the Capacity Purchase Price (CPP), which forms the bulk of the PPP—ranging from Rs. 16.04 to Rs. 16.80/kWh. CPPA-G's reporting aggregates CPP data, without providing plant-wise or technology-specific utilization rates. Aptma emphasized the need for generator-wise CPP disclosures and the implementation of performance benchmarks to ensure value-based payments. Another significant omission highlighted was the role of captive power generation. Due to high tariffs and the imposition of a Grid Transition Levy, captive users now face an effective gas price of $15.38/MMBTU, despite indigenous wellhead gas being priced at $4/MMBTU. This pricing regime has rendered captive plants economically unviable, leading to a 225 MMCFD drop in captive gas offtake and an RLNG surplus of 450 MMCFD—equivalent to 54 LNG cargoes annually. APTMA stated that 92,594 BBTU of high-cost RLNG (about 31 cargoes) has been diverted to residential users, incurring a cost of Rs. 299.9 billion at an average cross-subsidy rate of Rs. 3,239/MMBTU. This diversion significantly contributed to the increase in SNGPL's Estimated Revenue Requirement (ERR), which jumped by Rs. 707.37/MMBTU for FY 2025–26. The Association lamented the absence of integrated energy planning, which has led to structural inefficiencies across the energy value chain. Key decisions in the power and gas sectors are being made in silos, resulting in mismatches between RLNG procurement and actual demand, underutilized thermal capacity, and unsustainable cross-subsidies. APTMA stressed that the existing approach is financially unsustainable and could trigger a broader liquidity crisis in both public and private energy institutions. It urged NEPRA to require CPPA-G to adopt an integrated, unified energy planning framework that aligns demand forecasts, capacity procurement, and fuel supply strategies with real-world consumption and policy realities. Wrapping up the letter, Aptma called on Nepra to adopt a forward-looking, data-driven approach that reflects Pakistan's evolving energy landscape. The current CPPA-G models, while procedurally compliant, fail to account for major behavioral, technological, and structural shifts affecting electricity demand, fuel economics, and cost recovery. Addressing these gaps through integrated planning, transparent cost disclosures, and realistic demand forecasting is critical to ensuring industrial competitiveness, equitable tariff allocation, and the financial viability of Pakistan's energy sector. Aptma reaffirmed its readiness to collaborate with Nepra to develop a tariff framework that is both technically sound and aligned with the nation's broader economic goals. Copyright Business Recorder, 2025
Business Recorder
15-05-2025
- Business
- Business Recorder
Textile sector may return to costlier CPPs: PD's PPP projections to Nepra draw sharp criticism
ISLAMABAD: The Power Division came under heavy criticism on Thursday for submitting what were termed unsubstantiated Power Purchase Price (PPP) projections for FY 2025-26 to Nepra and for the continuing unreliable power supply by distribution companies (Discos). Concerns were raised that these issues could drive the textile sector back to costlier Captive Power Plants (CPPs), despite grid electricity being comparatively cheaper. The National Electric Power Regulatory Authority (NEPRA) held a public hearing chaired by Waseem Mukhtar, with participation from Member (Technical) Sindh Rafique Ahmad Shaikh, Member (Technical) KPK Maqsood Anwar Khan, and Member (Law) Amina Ahmed. Discussions revolved low hydrology levels, inflation, interest rate forecasts, GDP growth, solar tariffs, and fuel price assumptions. The Power Division team, led by Additional Secretary Mehfooz Bhatti and CPPA-G's Naveed Qaiser, presented seven scenarios using sensitivity analysis based on demand, hydrology, fuel prices, and exchange rates. In scenario one, CPPA-G has projected PPP at Rs 24.75 per unit, scenario 2- Rs 26.04 per unit, scenario 3- Rs 25.88 per unit, scenario 4- Rs 26.33 per unit, scenario 5- Rs 26.70 per unit, scenario 7- Rs 26.55 per unit and scenario 7, Rs 26.22 per unit. In response to a question, the representative of CPPA-G said that scenario 4 and 5 are likely to be implemented next year. Across the analyzed scenarios, indigenous fuels constitute 55% to 58% of the overall energy mix, while clean fuels contribute between 52% and 56%. Scenario 5 — marked by a high exchange rate of Rs 300/$, low hydrology, standard fuel prices, and normal demand—yields the highest projected PPP at Rs. 26.70/kWh. In contrast, Scenario 4 which assumes normal demand and an exchange rate of Rs 280/$, results in the lowest PPP at Rs. 24.75/kWh, primarily due to reduced capacity charges. Policy overhaul needed for textile sector CPPA-G representative Naveed Qaiser noted that the GDP growth, inflation and interest rates were projected on the information from IFIs, Finance Ministry and domestic financial experts. Amir Sheikh from Lahore stated that industry demands that electricity tariff decreases and in no way increases from July onwards as compared to the April/May/June quarter. 'Already the quality of power from grid is very poor resulting in up to 10% production loss as compared to captive generation and industry is considering switching back to captive. If tariff also increases, then it would lead to big fall in consumption,' he said adding that despite major renegotiations with IPPs, industry is amazed that the proposed tariff for next year is almost the same as last year and the benefit from renegotiations is nowhere to be seen. 'The various price deductions that were announced by Nepra were all time-bound till June. Therefore, if base tariff is not decreased from July 1, 2025 the tariff may increase by Rs 5-6 after the benefit of negative QTA and FCA will be over,' Amir Sheikh said. Chairman Nepra Waseem Mukhar directed Power Division to look into the viewpoint of industry, especially with recent poor quality of power supply from Discos, which is an irritant for industry and to provide future projections of power rates so that industry can make its plans accordingly. Mehfooz Bhatti, Additional Secretary Power said that abrupt suspension of supply is a serious issue and he would look into it through Power Planning and Monetary Company (PPMC). Arif Bilwani said that hydrology assumptions are very critical as we are facing substantially reduced water flows because of draught like conditions. Nepra has already directed the CPPA to prepare report and share and requested that the report be displayed on Nepra website. 'GDP growth figure is also on higher side as the World Bank has revised its projections downward from 2.8% to 2.7%. Demand growth is also not reflecting ground realities. Consistent decline in industrial demand particularly from LSM is being reported for the last 1 1/2 years, he added. 'Benefits of renegotiation with IPPs and GENCOS is not being reflected in Capacity Payments. Further increase in CPP (Rs. 60 billion) will accrue due to Jamshoro imported coal power plant. There is no mention/impact of renegotiation with the left out IPPs, GENCOs & Chinese power plants,' Bilwani argued. Kibor has been assumed at 11.9% although it is expected to be further reduced during the year reaching single digit. Inflation has been assumed at 8.65% which is extremely high, although the country is already witnessing, as per GOP, the lowest inflation in decades. There is a need to readjust the two figures. Bilwani further stated that the impact of solar Net Metering has not been properly accounted for in the assumption and requires to be looked at. The representative of Punjab Power Board enquired as to what was the financial impact of renegotiated IPPs and have the PPAs been made part of the assumption as projections of capacity payments are the same as last year. Naveed Qaiser responded that government had projected Rs 4 trillion reduction in capacity but reduced it to Rs 2 trillion to 2.4 trillion due to COD of Jamshoro Power Plant which will cost Rs 60 billion and Shahtaj Sugar Mills. Member KPK, enquired as to how much will the industrial tariff be reduced? The representative of CPPA-G stated that electricity rates can be reduced from 1 per cent to 8 per cent. According to Qaiser, projections for GDP growth, inflation, and interest rates are based on input from IFIs, Finance Division and other relevant entities. Nepra Chairman Waseem Mukhtar instructed the Power Division to take the concerns of industry seriously, particularly regarding poor service quality from Discos and future power pricing so industries can plan accordingly. Bhatti acknowledged that sudden power interruptions are a major issue and added that there is a commitment to addressing them through the PPMC. Tanveer Barry, representative from KCCI Karachi said that the projected power purchases ranges between Rs 24.75/kWh and Rs 26.22/kWh is still very high. This level of tariff undermines industrial competitiveness and increases the cost of doing business and may deter export growth. He further argued that the government claimed that it has saved trillions of rupees through negotiated agreement but capacity charges are still very high. In Pakistan industrial sector is paying almost double the electricity price as compared to other regional countries. Time of Use power tariff structure for industrial consumers should be abolished. Industrial consumption is declining because of expensive electricity. Expensive power plants should be shut down and replaced with efficient power plants and renewable energy. Rehan Jawed stated that the government should take a decision on net metering otherwise it will be become a big issue for the power sector like IPPs issue. The representative of Aptma, Amir Riaz criticised the planners for making irrelevant decisions. He proposed integrated approach to reduce electricity rates for the industry. Copyright Business Recorder, 2025
