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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
Express Tribune
09-05-2025
- Business
- Express Tribune
Work on Neelum-Jhelum not to resume anytime soon
A partially damaged wall of the Neelum Jhelum Hydropower Project is pictured following an Indian missile strike in Nausari, about 40km from Muzaffarabad. Photo: AFP The work on the 969 megaWatt Neelum-Jhelum Hydropower Plant (NJHP) in Azad Jammu and Kashmjir (AJK), which has been stopped for over a year because of technical faults, is unlikely to resume in the next financial year 2025-26, according to a report submitted to the power regulator. In the report submitted to the National Electric Power Regulatory Authority (Nepra), the Central Power Purchasing Agency (CPPA-G) has said that two power plants — Jamshoro Coal Power Plant and Shahtaj — have been considered for commissioning prior to the start of the fiscal year. However, due to ongoing technical issues, the NJHP has not been included within the forecast horizon, it says. It is learnt that the government has already spent Rs500 billion to set up this plant. Because of the fault, the work shut down on May 1, 2024. Furthermore, the NJHP — located at Nauseri near Line of Control (LoC) was damaged in Indian shelling on Wednesday. On Thursday, Water and Power Development Authority (Wapda) Chairman Sajjad Ghani visited the site to assess the damage to the structures and installations, and meet the staff. Speaking on the occasion, the Wapda chief said that Indian attack that damaged the hydraulic power unit 1 of intake gates, structure at de-sander units and residential camp, was in violation of the international laws including the Geneva Conventions. Electricity demand Meanwhile, the CPPA-G has also submitted a forecast of electricity demand in upcoming financial year — a key determinant in setting the end-consumer tariffs, with any fluctuation having a direct impact on tariff adjustments. It forecast the increase of 2.8 to 5 % in the electricity demand based on historical elasticity estimates, and GDP projections by the International Monetary Fund (IMF). The projections form the basis for the normal and high demand scenarios used in this analysis. The report outlines seven scenarios, specifically demand, hydrology, fuel prices, and exchange rates. Across the analysed scenarios, indigenous fuels constitute between 55 to 58% of the overall energy mix, while clean fuels contribute between 52 and 56%. To account for potential variability, two distinct demand scenarios have been developed based on extensive consultations with relevant stakeholders. The normal demand scenario reflects a projected 2.8% increase over Jan-Dec 2024, while the high demand scenario reflects a projected 5% increase. Power tariffs Fuel prices are a key driver of the fuel cost component within the Power Purchase Price (PPP). Accordingly, the forecast incorporates assumptions for normal fuel prices based on reputable data sources to ensure accuracy and relevance. The CPPA-G has projected the PPP at Rs26.70 per unit based on a high exchange rate of Rs300 per dollar, low hydrology, standard fuel prices, and normal demand. Another scenario, which assumes normal demand and an exchange rate of Rs280 per dollar, results in a low PPP at Rs24.75 per kWh. For imported fuels, price assumptions are based on market data from Argus Media and Plans, while local fuel prices are informed by inputs from NEPRA, the Oil and Gas Regulatory Authority (OGRA), and the Thar Coal and Energy Board (TCEB).
Business Recorder
09-05-2025
- Business
- Business Recorder
Power sector: Base tariff relief likely
The Central Power Purchasing Agency (CPPA) has set the ground for the power base tariff adjustment for FY26, submitting the Power Purchase Price (PPP) projection in consultation with multiple agencies including the Power Division. The CPPA's PPP projection envisions seven different scenarios, with varying assumptions for demand, rupee dollar parity, fuel prices, and hydrology. The PPP deviation between the best case and worst-case scenario is Rs1.95/unit. The lowest PPP is set at Rs24.75/unit for FY26 – which is Rs0.29/unit lower than the lowest PPP envisioned in the previous rebasing exercise of FY25. The PPP allowed for FY25 was Rs27/unit, with an absolute amount of Rs3.5 trillion. What looks increasingly likely is that the final PPP for FY26 will be lower year-on-year – regardless of which scenario is used as best case. The year-on-year savings in case of most likely adoption of Scenario 2 – which envisions are close to Rs0.96/unit – which may not sound massive but is a relief, especially considering this will be the first time in many years when year-on-year change in PPP is negative. For context, Pakistan's electricity PPP had doubled in last five years, despite significant improvement in fuel generation mix. A large part of it is due to savings to the tune of Rs100 billion resulting from renegotiated IPP contracts. The bar for demand has been set low – and understandably so, given the rather dismal rate of demand revival in the past two years. Even the 'high' demand scenario envisions power sales going up only 5 percent, that too, from a multiyear low 12-month demand from January to December 2024. The 'normal' demand growth scenario sees it growing 3 percent – which sounds just about right, given the ground reality, on both domestic and industrial fronts, and with the solar boom in full swing. What is concerning is the rather steep fall in power demand, which for FY26 is likely to be set at the lowest in five years. It remains to be seen what room does the government have in lieu of subsidies, once the final revenue requirement is approved – after induction of prior year adjustment and distribution margin. The fate of Rs1.71/unit subsidy that is scheduled to expire in June 2025, will determine the extent of base tariff relief for FY26. While the exchange rate and international commodity fuel prices have stayed stable, the biggest concern for upcoming fiscal year could be a sharp drop in electricity generation from hydel sources. Low hydrology could take the PPP close to Rs27/unit – wiping out any potential gains from the IPP negotiations. It remains to be seen, how the authorities treat hydel generation assumptions – especially in light of recent geopolitical events. Even without the one-sided abeyance of Indus Water Treaty, experts had been raising concerns over low hydrology going forward. In all likelihood, low hydrology will lead to higher periodic and monthly adjustments, even if base tariff does not account for the same.
Express Tribune
22-04-2025
- Business
- Express Tribune
Consumers seek uniform power tariff
Listen to article Electricity consumers have urged the government to introduce a uniform power tariff structure by eliminating peak and off-peak hour rates. They argue that this change would encourage higher electricity usage and better reflect the current energy landscape, which no longer suffers from load shedding due to an increased power generation capacity. The peak and off-peak system was originally implemented to manage electricity shortages during times of low installed capacity. Under this system, consumers were charged higher rates during peak hours to discourage consumption during those periods. However, during a public hearing conducted by the National Electric Power Regulatory Authority (NEPRA) on the Multi-Year Tariff (MYT) proposal for Faisalabad Electric Supply Company (FESCO) for FY2025-26, intervenors stated that the country now has surplus power and such differential pricing is no longer necessary. They pointed out that with no immediate electricity shortages, the time has come to introduce a flat, uniform tariff that would promote consistent electricity use and potentially aid economic productivity. Additionally, it was pointed out that the pattern of peak demand has shifted significantly due to the increasing contribution of solar energy through net metering. Previously, off-peak hours occurred in the evening, but now, with solar penetration, off-peak periods have moved to as late as 1AM, when consumer usage has seen a sharp rise. This shift further questions the relevance of the current peak and off-peak rate design. Meanwhile, NEPRA's notice outlined that FESCO has requested significant changes in its cost structure. One of the most notable requests is a sharp increase in the Power Purchase Price (PPP), which the company proposed at Rs389.053 billion. This contributes heavily to the total Revenue Requirement, which FESCO seeks to raise to Rs505.432 billion, up dramatically from the current Rs80.003 billion. If approved, this would result in a steep rise in the average consumer tarifffrom Rs5.37/kilowatt-hour (kWh) to Rs33.76/kWh. FESCO is also requesting an increase in Operation and Maintenance (O&M) costs from Rs34 billion to Rs44 billion, and a net margin boost from Rs54 billion to Rs64 billion. The company has reported transmission and distribution (T&D) losses at 8%. During the hearing, NEPRA addressed several critical issues, including whether the proposed adjustments align with the MYT framework, and whether the requested PPP and T&D losses are justified. It also questioned if limiting investment beyond allowed amounts should be applied at the end of the control period rather than annually. Further queries included whether the tariff schedule should follow a cost-of-service basis, if fixed charge mechanisms need revision to recover revenue, and whether current rate designs reflect the changing demand pattern. The application of late payment surcharges and adherence to regulatory guidelines were also under review.
