IPPs capacity payments projected to rise by 33pc to Rs2.8tr in next fiscal year

Consumers in Pakistan are bracing for higher electricity bills as independent power producers (IPPs) anticipate a significant increase in capacity payments. In the fiscal year 2023/24, capacity charges constituted a staggering 71% of power purchase costs, with consumers feeling the pinch of escalating bills.

Now, projections suggest that capacity payments will soar by 33% to Rs2.8 trillion in the upcoming fiscal year 2024/25. These projections were presented during a public hearing by the National Electric Power Regulatory Authority (NEPRA), where concerns were raised about the adverse impact on industrial operations and consumer affordability.

During the hearing, the Central Power Purchasing Agency (CPPA) outlined scenarios for the next financial year, indicating a potential increase of Rs5 per unit in electricity rates. This hike could add Rs310 billion to consumers’ bills, with the total power purchase price estimated to reach Rs3.58 trillion, up from Rs3.28 trillion in the current fiscal year. Notably, capacity payments are set to constitute a significant portion of this amount.

Despite the rise in capacity payments, the addition of new IPPs to the national grid continues, further exacerbating the financial strain due to the rupee’s devaluation. The CPPA projections for the next fiscal year also highlight anticipated increases in energy costs, ranging from Rs8.61 to Rs9.34 per unit, along with capacity charges between Rs15.49 and Rs17.42 per unit.

Furthermore, the distribution margins of XWDiscos are expected to rise by 15 to 20 percent, potentially burdening consumers with additional costs amounting to Rs337 billion to Rs358 billion.

The looming surge in electricity prices underscores the pressing need for effective measures to address the growing financial burden on consumers and ensure sustainable energy affordability in Pakistan.