The power sector in Pakistan is facing a challenging situation, with power consumption increasing by 4.4% in March over the previous year. The public sector distribution companies (Discos) have sought a refund of Rs1.5 per unit under the quarterly adjustment (QTA) for January-March, which is already part of the tariff reduction announced by the Prime Minister for April to June. The National Electric Power Regulatory Authority (Nepra) has scheduled two public hearings on April 29 to consider the QTA and fuel price adjustment (FCA) petitions from the Discos. The lower QTA is attributed to a combination of lower capacity charges, operations, maintenance, and fixed costs due to increased sales and fewer system losses, mainly caused by relative stability in the exchange rate and decline in interest rates.
Decline in Fuel Costs
The decline in fuel costs is largely due to the increase in base tariff allowed by Nepra through a 20% hike effective July 1, 2024. Approximately 75% of the total power supply in March came from domestic fuel sources, with around 20% of that at zero fuel cost. This indicates that the power companies have been able to reduce their fuel costs due to the increase in base tariff.
- The Central Power Purchasing Agency (CPPA) has filed a petition for a negative fuel cost adjustment of Rs1.5 per unit for March.
- The power consumption in March was 4.4% higher than the same month last year and almost 22% higher than February.
- The average fuel cost amounted to Rs9.22 per unit in March, compared to Rs9.34 per unit in the same month last year.
The Power Generation Mix
The power generation mix in Pakistan has undergone significant changes in recent months. The Central Power Purchasing Agency (CPPA) has reported that about 8,409 GWh of electricity was generated at an estimated fuel expenditure of Rs79.5 billion in March, of which 8,114 GWh energy was delivered to Discos at a cost of Rs74.85 billion (at Rs9.22 per unit).
| Sector | Share in the National Grid |
|---|---|
| Hydropower | 15.42% |
| Nuclear Energy | 26.4% |
| RLNG | 18.17% |
| Local Coal | 16.57% |
| Imported Coal | 6.5% |
LNG-Based Power Generation
The power generation mix in Pakistan has seen a significant shift towards LNG-based power generation in recent months. The LNG-based power generation was the most expensive, with its cost in March reported at Rs23.11 per unit, followed by Rs17.74 per unit from imported coal and Rs12.24 per unit on local coal. “The power sector in Pakistan is facing a challenging situation, and it is essential to ensure that the fuel costs are adjusted accordingly to prevent any undue burden on consumers.” – Central Power Purchasing Agency (CPPA)
Next Steps
The National Electric Power Regulatory Authority (Nepra) has scheduled two public hearings on April 29 to consider the QTA and FCA petitions from the Discos. The power companies have claimed in their petitions that the average fuel cost amounted to Rs9.22 per unit in March, compared to Rs9.34 per unit in the same month last year. The CPPA has filed a petition for a negative fuel cost adjustment of Rs1.5 per unit for March. The power generation mix in Pakistan has undergone significant changes in recent months, with hydropower losing its top position and nuclear energy emerging as the largest electricity supplier to the national grid. The third biggest share in the national grid came from RLNG at 18.17%, followed by local coal at 16.57%. Local gas contributed 11.64% to the national grid, while imported coal contributed 6.5%. In conclusion, the power sector in Pakistan is facing a challenging situation, and it is essential to ensure that the fuel costs are adjusted accordingly to prevent any undue burden on consumers. The power companies have sought a refund of Rs1.5 per unit under the quarterly adjustment for January-March, which is already part of the tariff reduction announced by the Prime Minister for April to June.
