Power tariffs: PPP sets base for tariff changes
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.
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Business Recorder
18 hours ago
- Business Recorder
Nepra hints at negative tariff adjustment of Rs1.80/unit
ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) on Monday hinted at negative adjustment of Rs 1.80 per unit in quarterly tariff adjustment for fourth quarter of FY 2024-25 which will replace Rs 1.54/kWh for third quarter of previous fiscal year, ordering inquiry of claims of Discos figures. During a public hearing on QTA adjustment for fourth quarter of FY 2024-25, presided over by Chairman Nepra, Waseem Mukhtar, the Discos sought negative adjustment of Rs 53.393 billion of which the share of reduction in capacity payment was Rs 53.714 billion. The Power Division has indicated negative adjustment of Rs 1.90/kWh. NEPRA's Member (Technical) Rafique Ahmad Shaikh challenged the Discos' performance narrative, citing past cases such as SEPCO, where NEPRA uncovered widespread misuse of detection billing to inflate recoveries. 'If these losses have actually reduced, where is the on-ground evidence?' he asked, calling for a deep investigation into the claims. Consumers of KE, others: Govt to pass on Rs53.4bn relief under QTA for Q4'25 On the claims of CEP GEPCO of substantial growth in consumption of electricity industry, Member KPK, Maqsood Anwar said industrialists say that industry is closing due to higher tariffs. He further asked CEO to prepare himself in 15-20 minutes to reply further questions. However, neither the Authority asked any question him nor he courage to reply. He also astonished that how 49 per cent increase has been witnessed in power utilization by the industry in fourth quarter of FY 2024-25 as compared to same period of FY 2023-24. NEPRA's Mubashar Bhatti claimed that the impact of extra recovery was just Rs 3 billion as compared to the reference of NEPRA. The major impact was lower capacity charges, termination of contracts of six IPPs of Rs 17 billion, Rs 18 billion of Neelum Jhelum hydropower project capacity, in addition to reprofiling of debts of K-2 and K-3. He confirmed 46 per cent increase in electricity consumption in fourth quarter of FY 2024-25 as compared to corresponding period of FY 2023-24. Major increase was witnessed in LESCO, GEPCO, HESCO etc. The main reason of increase in industrial consumption was stated as CPPs shifting from gas to grid. Another factor was lower tariff in this quarter as compared to the corresponding quarter of FY 2023-24. 'With increase in rates of gas and imposition of levy forced CPPs to shift towards the grid,' Bhatti maintained. The participants expressed doubts on the claims of savings of Rs 780 billion during the fiscal year 2024-25 and their hunch was that most of the reduction related to overbilling and detections bills instead of efficiency gains. Member (Technical), Rafique Ahmad Shaikh enquired what drastic changes have been witnessed in the system that Discos performed extraordinarily well. He maintained that Nepra had detected a case of SEPCO in which it was found that the Discos had unleased massive detection bills to its consumers. 'Power Division should investigate that if losses have reduced in real terms or something was manipulated to show better performance,' said Member Technical. However, the representative of Power Division/PPMC, Naveed Qaiser stated that there was reduction in Technical and Commercial (T&C) losses in Discos. He further stated out of Rs 780 billion reduction in circular debt, the share of efficiency gains was Rs 242 billion whereas Rs 175 billion was on other accounts. He further stated that Discos reduced their loss by Rs 122 billion as compared to last year. He further contended that it was foreseen that since most paying consumers are shifting to solar, Discos will show loss of Rs 640 billion in FY 2024-25 as compared to Rs 590 billion of 2023-24. Five Discos have not only recovered the bills of FY 2024-25 but some Discos have also recovered arrears due to which their recovery was over 100 percent. Also economic parameters remained under control. He said the government will continue to charge existing DSS at the rate of 3.34 per unit to retire Rs 1.275 trillion loans to be taken from banks to retire circular debt. Rihan Jawed from Karachi expressed doubts on the claims of Power Division regarding losses and recovery. He opposed continuous recovery of DSS saying it will be a dragon industry. The chairman Nepra also raised eyebrows at Discos figures, sought an update from Power Division on previous inquiries contending it was a big issue and not limited to one Disco only i.e. Lesco. He enquired about the status of inquiries against some Discos launched by the Power Division on overbilling, the representative Power Division Mehfooz Bhatti said he would submit a reply to the Regulator. He said, inquiry report in case of Lesco has been completed and a report has been submitted to the prime minister. The Member Technical also directed Power Division to 'dig out the facts on ground and Nepra team will also investigate the claims of performance claims of Discos.' He maintained that Power Division should check data of PITC, which will be enough to prove overbilling or not. The Nepra's team also noted that huge backlog of new connections was seen in Discos, in addition to delay in permission of net metering. The Faisalabad Electric Supply Company (Fesco) was on the top whose backlog is of 4000 applications. Arif Bilwani, a businessman from Karachi said that almost all the Discos have claimed better performance in the year 2024-25 and a particularly astonishing performance in the last quarter which seems doubtful particularly when they are under investigation for over billing, detection billing, average billing etc in the recent past. He argued that enquiries conducted by Nepra and Power Division also revealed massive fudging of figures which was ordered to be reversed. Final report is still awaited. Still no proper mechanism exists for elimination of theft in all the consumer categories. And he questioned why the elimination of cross subsidy is still lingering, and how long the burden of lifeline and protected consumers will be borne? A businessman from Lahore, Aamir Sheikh stated that industry is very worried about the 19 percent extra tariff applied by America on Pak exports. It is imperative now for cost of production in Pakistan to be reduced and in this regard the biggest issue is electricity rates. He appealed for the cross subsidy borne by industry (which is reportedly more than Rs6/unit) to end. And maintained that industry wants the government to confirm that the Rs 1.71/unit reduction (in lieu of petroleum levy) will be continued and electric duty removed from July 1, 2025 onwards (as announced by Power Minister). Industry fears that after almost 14 percent increase in rates from July 1, 2025 rates will increase by another six percent after the next quarter when last year's QTA will end, he added. Energy expert Asim Riaz pointed out that the shifting of captive from gas to grid has caused a loss of Rs 242 billion to the gas sector but the benefit to the electric sector was apparently 10 times less than that. The government should reveal the exact benefit in rupees that has been achieved as apparently the country is a net loser by this move, he said adding that the gas levy was supposed to be used to reduce electricity rate but that has not been done. Tanveer Barry, representative of KCCI said that government claimed that after negotiations with IPPs a big relief for consumers will be evident but industry cannot see any big relief adding that there has been 10 percent decline in industrial power consumption in Karachi. US imposed 19 percent tariff on Pakistan while Bangladesh, Sri Lanka and Vietnam will face 20 percent however Pakistan will miss the opportunity because electricity rates are high compared to other developing countries. He said consumers still pay capacity payment of Rs 1.7 trillion or Rs 17/ unit which means 63 percent total projected power purchase price of Discos. 'We do not agree with the Power Division calculation of Rs 93 billion in cross subsidies in industrial power tariffs, the actual cross subsidy amounts to Rs 137 billion. Last month Power Division tried to stop negative FCA for Karachi but they could not and now Karachi FCA has been delayed for unknown reason. According to Power Division circular debt is going down so why is the government taking a loan to reduce circular debt. As per audit report Discos charged Rs 244 billion in overbilling. Industrial tariff can be reduced by abolishing time of use,' he said. Copyright Business Recorder, 2025
Express Tribune
a day ago
- Express Tribune
NEPRA mulls Rs1.80/unit power tariff cut
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Housing sector under strain
EDITORIAL: The grievous state of the country's housing sector points to a crisis defined by deepening housing insecurity, unplanned urban sprawl, chronic institutional neglect, unaffordable options and substandard living conditions. A recent report by the House Building Finance Corporation highlights some of the key drivers behind the alarming shortfall of affordable, quality housing across Pakistan. It has specifically noted how rising inflation, elevated interest rates and increased taxes on property transactions have choked activity in the housing market, leaving sales and bookings nearly frozen. The study specifically paints a grim picture of housing finance accessibility for low-income groups. With current construction costs standing at Rs4,300 per square feet, even a modest 1,000-square-feet home is priced at a whopping Rs4.3 million. At a 15 percent interest rate, this translates into a prohibitive monthly mortgage payment of Rs57,139, well beyond the reach of most low-income households, who, based on standard affordability metrics, can allocate only around Rs9,165 to housing. Even if they somehow manage to cobble together a 30 percent down payment of Rs1.3 million, the remaining Rs3 million loan would still require monthly payments of Rs39,997, well above their entire monthly income. To make matters worse, the private sector offers few housing finance options for the low-income segment, and government efforts to introduce or expand cost-effective financing mechanisms have also been limited. As a result, affordable housing remains largely inaccessible to those who need it most. Instead, mortgage market growth continues to disproportionately benefit higher-income groups, while the broader sector remains hampered by deep-rooted structural and procedural inefficiencies that hinder inclusive access to housing finance. The crisis in the sector, however, goes well beyond the regulatory and financial hurdles to cost-effective housing. Our cities and towns are dotted with substandard, unsafe and poorly constructed dwellings that fail to meet basic standards of safety and livability. This deteriorating housing landscape both contributes to, and is worsened by, the twin existential challenges facing the nation: the galloping population growth rate and the increasingly unpredictable impacts of climate change. Urban housing, especially, continues to deteriorate in quality as population growth outstrips planned development, pushing millions into poorly built homes, and fuelling the rapid proliferation of slums. Here, millions are trapped in a cycle of deprivation, lacking access to essentials like clean water, sanitation, electricity, healthcare, and education. As the social and physical structures of our cities fray, we face a dangerous convergence of poverty, disease, environmental decay, crime and widening inequality. It isn't only informal settlements that suffer from poor-quality housing. Formal housing, especially in low-income neighbourhoods, is also in disrepair, with building codes routinely flouted, often due to corruption and weak enforcement. This has had deadly consequences, as seen in the recent tragedy in Karachi's Lyari neighbourhood. While the incident prompted a flurry of inspections and statements from city and provincial authorities, the scale of the problem is vast and demands sustained, systemic action beyond reactive measures. Adding to these structural failings is the growing intensity of extreme weather events, making it all the more urgent to shift towards more climate-resilient, environmentally sustainable housing. This must be paired with critical upgrades to related infrastructure, such as drainage systems, embankments, flood barriers, stormwater management, roads, and water supply networks. Instead, what we see is a persistent disregard for an integrated, holistic approach to urban planning and resilient construction. Slums continue to emerge along stormwater drains, while in recent years, even upscale housing societies have encroached upon natural waterways, amplifying monsoon-related destruction. Taken together, the challenges of affordability, poor quality, weak regulation, environmental vulnerability and systemic neglect have left Pakistan's housing sector deeply fractured, demanding urgent, holistic and long-term reform at every level of policy and planning. Copyright Business Recorder, 2025
