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Business Recorder
10-05-2025
- Business
- Business Recorder
Inefficiencies hiking capacity charges highlighted
ISLAMABAD: National Electric Power Regulatory Authority (Nepra) Member (Technical) Rafique Ahmad Shaikh has highlighted inefficiencies in the country's transmission system, which resulted in the payment of Rs 69 billion in capacity charges to three coal-fired power plants despite extremely low utilisation and less relief in tariff for March 2025 under monthly FCA mechanism. Shaikh made these observations in his two additional notes; i.e., on the Quarterly Tariff Adjustment (QTA) for the third quarter of FY 2024-25 whereas the second is on FCA adjustment for Discos for the month of March 2025. He also wrote a third additional note on delay in interconnection of the KE's system with NTDC due to which consumers of KE are not getting due relief in tariff. As part of this adjustment, Nepra approved a reduction of Rs 1.55 per unit, providing a total financial benefit of Rs 52.6 billion to consumers of power Distribution Companies and K-Electric (KE) in their electricity bills for May, June, and July 2025 whereas a negative adjustment of Rs 0.29 per unit was approved for Discos consumers. For KE, a negative adjustment of Rs 3.64 per unit has been approved. QTA & MTA: Nepra cuts tariffs for Discos and KE According to Shaikh, the capacity claimed by Distribution Companies (Discos) for the third quarter amounted to Rs 362.395 billion, which is significantly lower than the reference figure of Rs 459.286 billion. During the same period, electricity sales stood at 19,968 GWh—down from the reference figure of 21,846 GWh. He noted that typically, a decline in electricity sales leads to an increase in capacity charges due to the fixed-cost nature of these payments. However, this quarter witnessed the termination of certain Power Purchase Agreements (PPAs) and other adjustments related to Independent Power Producers (IPPs), which helped lower the overall capacity payments, resulting in a negative adjustment. Shaikh emphasised that although the quarterly adjustment saw a significant decrease, improved governance and more efficient operations could have further boosted electricity sales and led to an even greater reduction. To this end, he outlined several areas requiring urgent attention:(i) GENCO-II (Guddu Old), GENCO-III (TPS Muzaffargarh), and GENCO-I (Jamshoro Power Company Limited) collectively claimed Rs 1.237 billion in capacity payments— Rs 469 million, Rs 350 million, and Rs 418 million, respectively— despite generating no electricity during the quarter. These plants suffer from high generation costs and low operational efficiency, and are unlikely to receive dispatch orders in the future due to the availability of surplus, lower-cost capacity in the system. Continued payments to these non-operational units place an undue burden on the power sector and end consumers. A strategic review is essential to rationalise these expenditures and enhance sectoral efficiency; and (ii) transmission constraints are also severely limiting the utilisation of several efficient and cost-effective power plants in the southern region, including Port Qasim, China Power, and Lucky Electric. These plants reported utilisation factors of just 1%, 10%, and 0%, respectively, yet collectively claimed Rs 69.09 billion in capacity charges— Rs 26.95 billion for Port Qasim, Rs 30.88 billion for China Power, and Rs 11.26 billion for Lucky Electric. 'Such inefficiencies highlight the urgent need to address transmission bottlenecks and reform dispatch practices to ensure optimal use of the country's available low-cost power generation resources,' he added. Additional Note on FCA: In his additional note on Disco's FCA's determination for the month March 2025, he said serious efforts are being made across various forums to reduce electricity costs, several persistent issues— especially poor governance— continue to drive up electricity prices in Pakistan. The following key challenges have been outlined to help guide relevant stakeholders toward building a more efficient and sustainable power sector: (i) power generation in March 2025 was 8.5% below the reference level, partly due to AT&C-based load shedding. This AT&C based load shedding not only worsens public hardship but also results in underutilisation of 'Take or Pay' power plants, driving up costs. In March 2025, 'Take or Pay' thermal power plants, with a total capacity of 20,248-MW, operated at only 34.29% utilisation. Enhancing governance at the Disco level is essential to effectively eliminate aggregate Technical and Commercial losses; (ii) the continued outage of Steam Turbine Unit 16, ongoing since July 2022, at the Guddu 747-MW Power Plant resulted in Rs. 0.68 billion in losses for March 2025, raising total losses for FY 2024-25 (up to March) to Rs. 6.41 billion; (iii) operating the Guddu 747MW power plant in open cycle mode led to reduced output from this cost effective source, requiring the shortfall to be met through more expensive, marginal-cost plants. This shift added Rs 24 billion in extra costs in March 2025 alone, with total additional costs reaching Rs. 110 billion during FY 2024-25 (up to March). Progress on resolving the damaged steam turbine issue requires accelerated efforts; (iv) Neelum Jhelum 969MW hydropower plant has been out of operation since May 2024. Its non-availability in March 2025 forced reliance on costlier alternatives, resulting in an additional Rs. 4.5 billion in costs compared to March 2024. The total financial impact for FY 2024-25 (up to March) has reached Rs. 28 billion. Resolving the issue requires more concerted and focused efforts; (v) the HVDC infrastructure operated at only 32% utilisation in March 2025, while consumers continued to bear full capacity charges. Among other factors, a key reason for this underutilisation is the delayed completion of the Lahore North Grid Station. Efforts must be intensified to complete the task without any further delay; (vi) Transmission and grid system constraints led to losses of Rs. 0.62 billion in March 2025, bringing the cumulative impact to Rs. 12.31 billion for FY 2024-25 (up to March). Efforts should be intensified to quickly remove transmission constraints that are harming the sector's financial viability; and (vii) Part Load Adjustment Charges (PLAC) amounted to Rs. 2.6 billion in March 2025, bringing the total to Rs. 29.8 billion for FY 2024-25 (up to March). These charges are expected to rise further, as PLAC schedules for some power plants are still being finalized. A study should be conducted to reduce PLAC through effective demand-side management. He further stated that March 2025 FCA includes a negative prior period adjustment of approximately Rs. 3.29 billion. Excluding this, the FCA would have reflected a positive adjustment of Rs. 0.37/kWh. Prior period adjustments, whether positive or negative, are undesirable. To minimise their occurrence and impact, invoicing, verification, and adjustment processes should be improved, with any such adjustments limited to a maximum period of not more than two months. KE's FCA for February 2025: Member (Technical) stated that the successful enhancement of the interconnection between K-Electric and the National Transmission and Despatch Company (NTDC) to a safe operating limit of 1,600MW is a commendable step. However, efforts to further increase this capacity to 2,000MW and beyond— originally targeted for completion by June 2024— remained incomplete. In February 2025, the fuel cost in KE's generation mix stood at Rs. 20.01/kWh, significantly higher than NTDC's average of Rs. 8.23/kWh. 'If the interconnection capacity had been upgraded as planned, increased reliance on NTDC's lower-cost surplus power could have further reduced the Fuel Cost Adjustment, easing the financial burden on consumers,' he said adding that in light of the current surplus of economical generation within the NTDC system and the high cost of KE's internal generation, it is imperative that the interconnection upgrade be completed without further delay. Copyright Business Recorder, 2025
Business Recorder
10-05-2025
- Business
- Business Recorder
QTA & MTA: Nepra cuts tariffs for Discos and KE
ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) on Friday announced a reduction in electricity tariffs for both Distribution Companies (Discos) and K-Electric under its quarterly and monthly adjustment mechanisms. For the third quarter of FY 2024-25, Nepra approved a tariff reduction of Rs 1.55 per unit under the Quarterly Tariff Adjustment (QTA) mechanism for all Discos and KE. Additionally, under the Fuel Charges Adjustment (FCA) mechanism, a Rs 3.64 per unit reduction was approved for KE for February 2025 and a Rs 0.29 per unit decrease for Discos for March 2025. Nepra issued three separate notifications reflecting these determinations. KE consumers will benefit from a total relief of Rs 5.19 per unit in May 2025, combining both QTA and FCA adjustments. Further reductions for June and July will depend on future FCA data. Discos and KE: Nepra approves Rs1.71 tariff cut on PD's motion Discos consumers will see a combined relief of Rs 1.82 per unit in their May 2025 electricity bills. However, the joint impact of QTA and FCA in the months of June and July will be determined after the Central Power Purchasing Agency – Guarantee (CPPA-G) submits the relevant data. According to the QTA notification, Nepra has approved negative quarterly adjustments totaling Rs 52.603 billion for the third quarter of FY 2024-25. This adjustment will be spread over three months—May to July 2025—at a uniform rate of negative Rs 1.5538/kWh, applicable to all consumer categories except lifeline and prepaid consumers. Regarding KE's FCA, Nepra has approved a provisional negative FCA of Rs 3.6396/kWh, subject to revision once the Multi-Year Tariff (MYT) for FY 2024-30 is finalized. Any differences arising from the MYT determination will be adjusted in future periods. This reduction applies to all consumer categories, except lifeline consumers, protected domestic consumers, Electric Vehicle Charging Stations (EVCS), and prepaid consumers. This adjustment will be reflected separately on consumer bills based on units consumed during the relevant month. If any May 2025 bills were issued prior to the notification, the relief will be incorporated in subsequent billing cycles. As for Discos, Nepra has determined a national average uniform reduction of Rs 0.2883/kWh in the tariff for March 2025 under the FCA mechanism. This reduction, applicable to all consumer categories except lifeline, protected, EVCS, and prepaid consumers, will be reflected in May 2025 bills based on March consumption. Similar to KE, any early billing will be adjusted in future months. Copyright Business Recorder, 2025
Business Recorder
30-04-2025
- Business
- Business Recorder
Reduced hydropower, costly fuels: Govt warns of potential hike in power bills
ISLAMABAD: The government on Tuesday warned of a potential hike in electricity bills during the summer months, citing reduced hydropower generation and greater reliance on expensive fuels — despite marginal negative adjustments under the Fuel Cost Adjustment (FCA) and Quarterly Tariff Adjustment (QTA) mechanisms. This was revealed by officials from the National Power Control Centre (NPCC) and Central Power Purchasing Agency – Guaranteed (CPPA-G) during public hearings held by the National Electric Power Regulatory Authority (Nepra) on FCA for March 2025 and the QTA for the third quarter of FY2024-25 (January–March). Nepra officials stated that the QTA is expected to result in a negative adjustment of Rs 1.52 per unit, applicable during May, June, and July 2025. Energy sector reforms: Govt makes new commitments to IMF Discos have sought a total reduction of Rs 51.493 billion, of which Rs 47.124 billion stems from lower capacity charges — Rs 16 billion due to contract terminations and Rs 17 billion through revised agreements with Independent Power Producers (IPPs). This adjustment will also apply to K-Electric consumers. Total savings from revised and terminated pacts was around Rs 91 billion as of now. For March's FCA, a negative adjustment of 3 paisa per unit has been requested, with an overall financial impact of Rs 250 million. However, when combined with the 90 paisa per unit already approved for April through June 2025, the net relief to consumers will be limited to 50 paisa per unit — excluding lifeline consumers. The actual reference fuel cost for March stood at Rs 9.2251 per unit, compared to a reference FCA of Rs 9.2560 per unit. CPPA-G CEO Rihan Akhtar confirmed that if the Rs 3.291 billion Prior Year Adjustment (PYA) had not been included, the FCA would have resulted in a higher positive impact on consumer bills. The NPCC General Manager assured that power generation would remain sufficient due to fuel availability, but noted that FCA costs will rise due to the use of more expensive fuels. The CPPA-G stated that there was 6 per cent reduction in electricity demand in March 2025 as compared to reference month of 2024, however a growth of 6 per cent has been witnessed in March as compared to February 2025. The NPCC noted that it transmitted 8.70 percent less energy in March as compared to the same month of 2024. It also shared details of routine outages and forced outages in the month due to which expensive plants were operated. During the session, Arif Bilwani and Amir Sheikh raised questions regarding fuel allocation, future power generation plans, and industry concerns. Sheikh criticized the lack of benefit to the industrial sector despite freeing up indigenous gas following the forced shift of captive power plants to the national grid. He demanded clarity on where this gas has been redirected and called for an increase in FPA refunds to industry. Bilwani said sarcastically that the government's officials should also apply their minds instead of totally depending on Allah's kindness. The hearing also saw Nepra Chairman Waseem Mukhtar express strong displeasure over the absence of senior officials from the Power Division and three key distribution companies—HESCO, MEPCO, and PESCO. He instructed Nepra staff to summon explanations from their CEOs and to issue a formal letter to the Secretary Power. 'If this QTA hadn't been negative and in favor of consumers, I would've returned the petitions filed by the Discos. Unfortunately, this is the culture we live in,' the Chairman remarked. Amir Sheikh urged that the QTA be implemented starting April to fulfill commitments made by the Prime Minister. 'If the relief starts in May, the rate reduction promised by the PM won't be realized,' he said. Tanveer Barry of the Karachi Chamber of Commerce and Industry (KCCI) highlighted poor performance of Discos in curbing theft and bill recovery. He noted that Pakistan's circular debt reached Rs 2.4 trillion in FY24—2.3% of GDP—while transmission and distribution losses for Discos and K-Electric were 20.1% and 16%, respectively. Barry also criticized the government's consideration of new commercial loans to reduce circular debt, warning that the burden would ultimately fall on law-abiding consumers. 'Electricity in Pakistan remains more expensive than in other regional countries. We need to begin working on lowering the base tariff for the next fiscal year — this three-month relief isn't enough,' he concluded. Copyright Business Recorder, 2025
Express Tribune
05-04-2025
- Business
- Express Tribune
Oil consumers to fund tariff cut
Listen to article Oil consumers are set to mainly fund the recent reduction in electricity tariffs up to 17% under the prime minister's relief package. The National Electric Power Regulatory Authority (Nepra) on Friday held a public hearing to consider the government's request for a tariff reduction of Rs1.71 per unit for consumers across Pakistan, including Karachi. It was informed that total subsidy had been increased to Rs266 billion after adding Rs58.6 billion worth of petroleum development levy (PDL). Currently, the government is providing Rs266 billion in tariff differential subsidy to bridge the gap between actual and notified tariffs, which could rise to Rs324 billion with the latest tariff proposal. The government has recently increased PDL from Rs60 to Rs70 per litre on petrol and diesel each but it announced that its impact would be redirected to electricity consumers. Now, it is believed that oil consumers will provide Rs58 billion in additional PDL to cross-subsidise the electricity consumers. At the hearing, Nepra directed the Power Division to clear the confusion among consumers, especially the industrial sector. While hearing a government petition for the tariff reduction of Rs1.71 per unit on account of additional PDL of Rs58.6 billion for three months, Nepra chairman stated that work was underway to firm up the prime minister's announcement of a power tariff cut of Rs7.69 per unit for industrial consumers and Rs7.41 per unit for domestic consumers, excluding lifeline users. He added that consumers would receive an immediate relief of Rs5.03 per unit within the next few days, while the remaining relief would be provided in the quarterly tariff adjustment (QTA) for the third quarter. Industrialist Aamir Sheikh acknowledged the tariff reduction but pointed out that there was a discrepancy as Nepra chairman cited a relief of Rs5 per unit whereas the Power Division indicated a reduction of Rs6. The breakdown of QTA relief includes Rs1.9 per unit under the tariff differential subsidy, Rs1.71 under QTA and Rs1.36 under the fuel price adjustment (comprising Rs0.46 and Rs0.90 per unit). "I hope Nepra will clarify whether the relief from the upcoming QTA will be given to consumers in the current quarter (April-June), meaning two QTA simultaneously, or it will be finalised now but will be implemented in the July-September quarter," he said. "If the next QTA is granted in this quarter and is around minus Rs1 per unit, this clarification would allow us to estimate a net relief of around Rs4 per unit and plan export sales accordingly," he added. Arif Bilwani and Tanveer Barry also sought clarifications on several points raised during the public hearing. The proposed decrease in tariff is required to be implemented through an increase in the tariff differential subsidy, with the government already securing cabinet's approval before submitting the request to Nepra. The relief will be applicable to all power distribution companies, including K-Electric (KE), for three months. However, officials clarified that lifeline consumers would not enjoy the benefit. According to Power Division officials, the government aims to offset the cost through estimated savings of Rs58 billion by keeping petroleum prices stable over the next three months. Additional relief is being provided through revisions in power purchase agreements as savings of Rs12 billion following negotiations with independent power producers (IPPs) had already been included in the recent QTA. The government is also negotiating with banks to cope with the circular debt. These talks are part of a broader strategy to finalise an arrangement that could slash liabilities in the power sector. Officials clarified that the relief to consumers was being provided through quarterly adjustments instead of annual rebasing because of the current economic conditions. Nepra officials confirmed that a relief of Rs1.36 per unit had already been granted under the fuel charges adjustment and with the proposed reduction of Rs1.71, consumers could receive an immediate cumulative relief of Rs5.03 to Rs5.04 per unit. The authority will review the submitted data and issue a formal decision. Power Division officials emphasised that the continuation of relief measures would depend on macroeconomic stability, noting that the current financial situation did not allow for annual tariff rebasing, which was why quarterly adjustments were being used. The third quarterly adjustment request is expected to be submitted in the second week of April. During the hearing, concerns were raised about the burden being placed on grid-connected consumers due to increasing net-metering connections, translating into a tariff hike of Rs1.5 per kilowatt-hour (kWh). In response, Nepra officials stated that the government was actively deliberating on the issue and was expected to announce a decision soon. They added that adjustments may also be introduced during the upcoming tariff rebasing to ensure fairness while protecting grid consumers. Rs3.02 relief for KE consumers Separately, Nepra issued its decision on KE's petition for the provisional fuel charges adjustment for January 2025, indicating a relief of Rs3.02 per kWh. This will be passed on to consumers in April 2025 bills. Nepra provisionally retained Rs2 billion in respect of adjustments on account of partial load, open cycle and degradation curves along with start-up cost pursuant to its decision regarding generation tariff for the period July 2023 onwards from the fuel charges adjustment for January 2025. It would be adjusted against pending KE claims to ensure that consumers are not burdened at a later stage.
