Another power package being worked out

MUSHTAQ GHUMMAN

ISLAMABAD: The federal government is working on another electricity tariff package aimed at boosting daytime power consumption, which has declined sharply due to the massive adoption of solar energy.

This was disclosed by a representative of the Power Planning and Monitoring Company (PPMC) during a public hearing on Fuel Charges Adjustment (FCA) for December 2025. The Central Power Purchasing Agency–Guarantee (CPPA-G) sought a positive FCA adjustment of 48 paisa per unit from consumers nationwide for December 2025. However, once the negative adjustment of 93 paisa per unit applicable for November 2025 (to be reflected in January 2026 bills) is adjusted, the cumulative impact will be a net increase of Rs1.41 per unit, to be applied in February 2026.

The hearing was chaired by NEPRA Chairman Waseem Mukhtar, along with Member (Law) Amina Ahmed and Member (Development) Maqsood Anwar Khan.

During discussions on the sharp decline in electricity consumption from the national grid — highlighted by the representative of the Independent System and Market Operator (ISMO) as well as Nepra’s Member (Development) — the PPMC representative said the government is exploring multiple options to increase daytime consumption.

“We are working along the lines of India and Sri Lanka, where electricity is provided at marginal cost after recovery of grid costs, so that the daytime demand dip can be addressed and consumers can be offered electricity at lower rates to encourage consumption,” said Naveed Qaiser, representing PPMC.

Responding to a query, he added that the Power Division is actively working on the proposal and will soon present it to the regulator.

The ISMO representative noted that while an addition of 4,600 MW may not seem significant on its own, it becomes critical when winter demand falls from around 14,000 MW to just over 10,000 MW.

The CPPA-G and PPMC also claimed that electricity consumption increased by 22 percent in December 2025 due to the incremental tariff package of Rs22.98 per unit. However, this claim was strongly contested by industrial representative Rehan Javed, who argued that the government lacked comparative industrial gas consumption data for December 2023 and December 2025.

He maintained that the incremental package failed to spur genuine industrial demand, asserting that the reported growth was largely due to captive power plants (CPPs) shifting from gas to the national grid rather than any real increase in consumption.

Another industrial consumer, Aamir Sheikh, said the industry was shocked to see the tariff for December 2025 rise by Rs1.41 per unit compared to November. He further pointed out that Nepra had quietly increased tariffs from January 1, 2026, by Rs1.34 per unit by lowering the FCA reference benchmarks.

He explained that had the new benchmark been applied in December, the tariff increase would have been Rs2.54 per unit instead of Rs1.41. He added that for January 2026, the benchmark has been reduced to Rs10.40 per unit from the previous Rs11.64, effectively increasing the tariff by Rs1.24 per unit despite claims of no change.

According to him, the average tariff rose by Rs1.34 per unit during rebasing. He also reiterated the industry’s long-standing demand for the elimination of cross-subsidies imposed on industrial consumers. Besides the Rs4–5 per unit cross-subsidy embedded in tariffs, industries are also charged Rs3.23 per unit as Debt Service Surcharge (DSS), which he termed another form of cross-subsidy used to retire past circular debt.

He argued that industry had no role in creating circular debt, as it already pays tariffs above cost, has negligible line losses, and ensures full recovery. He further cited the inter-DISCO tariff equalization mechanism as another burden on industry, bringing the total cross-subsidy to nearly Rs10 per unit.

On the incremental package, Sheikh said industrial load in December — the first month of the package — remained unchanged compared to October and November 2025. He rejected the 22 percent growth claim, saying it was based on December 2023 figures and ignored the fact that captive industries had shifted to the grid at the start of 2025.

“Even with the package, almost half of the industry did not qualify. In fact, FCA, FPA and QTA increased due to the package. Industries that did qualify received an average benefit of only Rs2.3 per unit, which has already been wiped out by higher FPA and rebasing-related tariff increases,” he said.

He added that reducing electricity prices from 13 cents to 12 cents per unit is insufficient to drive consumption when regional competitors offer power at around 5 cents per unit.

Sheikh concluded that the only viable solution is to remove actual cross-subsidies on industry and fix industrial tariffs at around 7 cents per unit, while supporting protected consumers through targeted subsidy programs such as BISP, in line with World Bank recommendations.

Nepra members also expressed serious concern over the sharp decline in grid electricity consumption due to rapid solarization across the country.