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.

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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