In a bid to provide much-needed relief to consumers, the government is set to announce a major reduction in electricity tariffs as Power Distribution Companies (Discos) have filed petitions requesting a negative adjustment of up to Rs 52.123 billion (around Rs 2 per unit) for the second quarter of FY 2024-25 under QTA mechanism.
Officials said that with the approval of Discos requests of negative adjustment in QTAs, this will lower electricity prices for millions of consumers across Pakistan, starting from March 2025.
National Electric Power Regulatory Authority (Nepra) is scheduled to hold a public hearing on February 12 2025, regarding the petitions filed by Discos through the Central Power Purchasing Agency Guaranteed (CPPA-G). Of the total requested negative adjustment of Rs 52.123 billion, Rs 50.658 billion is attributed to the exchange rate difference (Rs 278/$ versus the projected Rs 300/$) and a reduction in interest rates. The QTA will affect electricity tariffs for March, April, and May, with the existing Paisa 19.5 per unit QTA set to expire on February 28, 2025.
In addition, the PM is expected to announce a further reduction of Rs 7 per unit for consumers, particularly for the industrial sector, starting in April 2025. This implies that the total reduction will be around Rs 9-10 per unit from April onward, driven by capacity payments to Independent Power Producers (IPPs) and Government Power Plants (GPPs).
The government claims that the termination of power purchase agreements (PPAs) for five IPPs, along with the revision of contracts for eight bagasse-fired IPPs and 15 other IPPs will result in annual savings of Rs 137 billion. These savings, part of a broader effort to reduce energy costs by Rs 1.14 trillion, will be passed on to consumers. The new contracts have already been approved by the Federal Cabinet.
At a recent meeting of Federal cabinet, PM Shehbaz Sharif, who has already directed Power Division to take steps to reduce electricity tariff by Rs 7 per unit, has commended the efforts of the Minister for Power, Sardar Awais Leghari and SAPM on Power, Muhammad Ali and his team for successfully renegotiating the agreements with IPPs, which would result in reduction of electricity prices by Rs7 in the first phase. He also resolved that the reduction of electricity prices would be announced in consultation with the IMF.
According to data shared with Nepra, by the CPPA-G on behalf of Discos, the following adjustments have been requested for the second quarter of FY 2024-25: Islamabad Electric Supply Company (IESCO) has sought negative adjustment of Rs 4.478 billion for the second quarter; Lahore Electric Supply Company (Lesco) Rs9.632 billion, Gujranwala Electric Power Company (Gepco) Rs 6.498 billion, Faisalabad Electric Supply Company (Fesco) Rs 10.989 billion, Multan Electric Power Company (Mepco) Rs 10.628 billion, Peshawar Electric Supply Company (Pesco) Rs 2.218 billion, Hyderabad Electric Supply Company (Hesco) Rs 427 million, Quetta Electric Quetta Supply Company (Qesco) Rs 1.772 billion, Sukkur Electric Supply Company (Sepco) Rs 3.024 billion and Tribal Electric Supply Company (Tesco) Rs 3.309 billion. The total requested amount for variable O&M is Rs 2.691 billion, Use of System Charges (UoSC) Market Operator Fee (MOP) Rs 1.326 billion and impact of incremental units was recorded at Rs 166 million.
According to Nepra, in the light of policy guidelines issued by the federal government for application of uniform quarterly adjustments, the third quarterly adjustment for FY 2024-25 of Discos to be determined by the Authority, shall also be applicable on the consumers of K-Electric. However, lifeline consumers who are already enjoying subsidy will not be passed QTAs relief.
