Consumers to bear burden of Rs 2.95 trillion amid intensifying economic pressure on power sector

• Nepra predicts that consumers will pay Rs 1.92 billion in capacity payments.
• Rs 1,023 billion to be paid under the Power Purchase Price (EPP) next year.
• Consumers to bear distribution margin of Rs 4.09 per unit: Nepra

Electricity consumers are expected to shoulder a burden of Rs 2.95 trillion in capacity payments and power purchase costs in calendar year 2026, highlighting the intensifying economic pressure on the country’s power sector on end users, The News reported on Tuesday.

The National Electricity Regulatory Authority (Nepra) has arrived at the decision on a proposal filed by the federal government under sections 7 and 31(&) of the Nepra Act regarding the formulation of final consumer tariff for CY26.

The regulator projects that consumers will pay Rs 1,923 billion in capacity payments and Rs 1,023 billion under the Power Purchase Price (EPP) next year. Combined, these charges alone translate to Rs 22.76 per unit, even before other charge items are added.

The revenue requirement of electricity distribution companies (Discos) for CY26 has been estimated at Rs 3.379 billion, resulting in a basic electricity tariff of Rs 33.38 per unit.

This includes a generation cost of Rs 28.88 per unit, which includes capacity charges of Rs 17.56, power charges of Rs 9.12 and system usage charges (UoSC) of Rs 2.19 per unit. Consumers will also incur a distribution margin of Rs 4.09 per unit, prior year adjustments of Rs 0.71 per unit and working capital costs of Rs 29 billion, adding Rs 0.29 per unit to the base tariff.

Despite the tariff hike, the government will provide Rs 629 billion in electricity subsidies during 2026, including Rs 614 billion for residential consumers and Rs 15 billion for agriculture consumers. If K-Electric’s capacity payments are included, the total capacity payment burden will rise to Rs 2.1 trillion nationally, further intensifying the pressure on electricity consumers.

Pakistan’s total installed generation capacity reached 58,013 MW. Net metered solar contributes 6,320 MW and off-grid solar 12,629 MW, pushing the share of clean energy to 55% of the mix (fossil fuels 45%). Local fuels and renewables now provide 74% of electricity, with only 26% from imported fuels. Must production units dominate, accounting for 55 percent of production payments and swelling production capacity.

State Hydel units have a total capacity of 9,590 MW, while IPP hydel adds 2,007 MW. Thermal power is allocated 6,828 MW (Government) against 11,547 MW (IPPs) and nuclear power is 3,530 MW. In renewables, the public sector provides 100 MW and IPPs 2,795 MW. K Electric’s generation capacity is 2,647 MW.

By 2035, the country aims to increase total installed capacity to 87,207 MW, with 90% from clean sources. State-owned units will add 19,284 MW and IPPs 2,074 MW, while fossil fuel capacity will be reduced to 10%.

Nuclear is expected to reach 4,730 MW, RES to 7,560 MW and K Electric 3,847 MW. Net metering is projected at 12,296 MW and off-grid solar at 18,944 MW.

As a result, 88% of production will come from factories that need to run, raising concerns about cost rigidity.

Officials said industrial cross-subsidies have come down from Rs 225 billion to Rs 102 billion, reducing the impact of tariffs on the industry by Rs 5.13 per unit. Even so, industrial electricity tariffs remain at 12.90 cents per unit, more than double China’s 5 cents per unit, weakening export competitiveness.

Meanwhile, the number of protected residential consumers has increased from 9.5 million to 20.71 million, accounting for 61% of total residential consumers, mainly due to the adoption of rooftop solar. This segment now receives the largest share of electricity subsidies — Rs 474 billion annually, significantly increasing the burden on the rest of the paying consumers.

APTMA argued that the inclusion of the cross-subsidy in the off-peak tariff for B3 and B4 industrial consumers makes the tariff uncompetitive in international markets. It was claimed that electricity tariffs in competitive regional and global markets range from five to nine US cents per kWh, while the prevailing industrial tariff in Pakistan is around US 12.90 cents per kWh, as submitted by the Ministry of Energy.

APTMA further stated that sheltered residential consumers are heavily subsidized whose burden is cross-subsidized by industrial consumers. Aamir Sheikh, Rehan Javed, Asim Riaz and Arif Bilwani, while representing the industrial sector, opposed the continuation of cross-subsidy borne by industrial consumers.

They argued that a streamlined and lower industrial tariff would allow industries to expand operations, enhance export competitiveness and create jobs.

It was further argued that industrial growth would indirectly lift low-consumption household consumers through increased economic activity, while at the same time reducing the fiscal burden of subsidies on the federal government. Arif Bilwani also called for the abolition of peak and off-peak rates across the industry.