NEPRA flags power woes for industry
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The National Electric Power Regulatory Authority (Nepra) has directed the Power Division to address the concerns of the industrial sector regarding inconsistent power supply. Industries are reportedly considering a return to captive power plants (CPPs) despite their higher operational costs due to frequent grid supply disruptions.
The directive was issued during a public hearing on a petition filed by the Central Power Purchasing Agency-Guarantee (CPPA-G) concerning the assumptions used to project the power purchase price (PPP) for financial year 2025-26. The hearing was chaired by Nepra Chairman Waseem Mukhtar and attended by Member (Technical) Sindh Rafique Ahmad Shaikh, Member (Technical) K-P Maqsood Anwar Khan and Member (Law) Amina Ahmed.
CPPA-G presented seven scenarios for the proposed PPP. In scenario one, it projected the price at Rs24.75 per unit, scenario two – Rs26.04 per unit, scenario three – Rs25.88 per unit, scenario four – Rs26.33 per unit, scenario five – Rs26.70 per unit, scenario six – Rs26.55 per unit and scenario seven – Rs26.22 per unit. Replying to a question, CPPA-G representative Naveed Qaiser said that scenarios four and five were likely to be implemented next year.
However, those projections were challenged by several interveners, who argued that the estimates did not adequately reflect the expected decline in hydropower generation. They also criticised the assumed exchange rate of Rs290/$, which was likely to influence future electricity pricing.
During the hearing, it was revealed that the PPP could drop by 78 paisa to Rs2.25 per unit, potentially saving consumers Rs140 billion to Rs400 billion in the next fiscal year. The average purchase price is expected to range between Rs24.75 and Rs26.22 per unit compared to the current average of Rs27 per unit.
Authorities projected a possible Rs2-per-unit reduction in tariffs alongside a 2.8% to 5% increase in demand, assuming an exchange rate of Rs300/$ in FY 2025-26.
The case officer explained that due to varying demand and fuel price assumptions, average per-unit prices in different scenarios could range between Rs6.8 and Rs8.1. Total fuel costs might reach Rs1.28 trillion, influenced by exchange rate fluctuations, inflation and interest rates.
Some scenarios also predict a 24% reduction in electricity prices compared to the current year. Transmission losses for National Transmission and Despatch Company (NTDC) are expected to remain stable at 2.80%.
Nepra questioned the Ministry of Energy's optimistic demand projections, especially given the recent downward trends. In response, ministry officials argued that demand was expected to rebound in line with the projected GDP growth. They noted that electricity demand rose 28% in April, attributing the uptick to recent tariff reductions that encouraged industries to reconnect to the grid.
The projections of CPPA-G were challenged by the interveners, who stated that PPP projections for FY26 were not correct, as a reduction in hydel generation was imminent. The budget for FY26 is projected to be prepared at an exchange rate of Rs290 per dollar.
During the hearing, it was revealed that the PPP was estimated to decrease by 78 paisa to Rs2.25 per unit, which could provide relief worth Rs140 billion to Rs400 billion to electricity consumers in the next fiscal year. According to officials, the estimated PPP for the upcoming fiscal year will range between Rs24.75 and Rs26.22 per unit, compared to Rs27 per unit for the current fiscal year. Authorities also estimated a Rs2-per-unit reduction in electricity prices and a 2.8% to 5% increase in demand. The US dollar is projected to be valued at Rs300 in the next fiscal year.
The case officer informed Nepra that the request pertained to PPP projections for the coming fiscal year. Different scenarios suggest a significant variation in electricity prices, with the average per-unit price likely to remain between Rs6.8 and Rs8.1.
Due to potential increases in fuel costs, the total fuel cost could rise to Rs1,284.11 billion. Factors such as the dollar rate, inflation and interest rates impact electricity prices, which is why prices are expected to be higher in scenarios with low demand and high fuel costs. The briefing revealed that compared to the current fiscal year, some scenarios could result in a 24% decrease in electricity prices, while transmission losses for NTDC are expected to remain at 2.80%.
Nepra questioned the Ministry of Energy's claims regarding increased electricity demand. The authority's chairman asked how an increase was expected when demand had been declining in recent years. The Ministry of Energy responded that demand was expected to rise based on GDP growth and recent reductions in electricity prices had already led to an increase in demand. In April, electricity demand increased by 28% and industries have started returning to the grid. If tariffs remain low, electricity demand will increase. The Ministry of Energy also briefed Nepra on fuel price projections for the next fiscal year. Officials stated that the cost of gas for electricity generation was estimated at Rs1,050 per mmBtu.
Thar coal is projected to cost $20 per ton from July to September and $18 to $19 per ton from October to June. Imported coal (API 4) is estimated to remain at $100 per ton throughout the year, imported coal (ICI 3) at $74 per ton and imported coal (ICI 5) at $35 per ton. Brent crude oil is expected to be priced at $74 per barrel until January 2026 and $72 per barrel from March to June 2026.
According to the Nepra briefing, furnace oil is estimated to cost $522 per ton from July to December and $508 per ton from January to June. The price of high-speed diesel is expected to remain at Rs264 per litre throughout the year.
The Ministry of Energy added that according to the IMF, the GDP was expected to grow by 3.6% in 2026 and electricity demand was projected to increase by 2.8% to 5%. Demand on the 132kv grid may reach between 128,000 million and 131,000 million units.
Officials stated that electricity demand dropped significantly in 2023, improved somewhat in 2024 and was expected to grow steadily in the coming years.
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