Major Reduction in Power Tariffs Expected in Pakistan Starting March 2025
BUSINESS
Major Reduction in Power Tariffs Expected in Pakistan Starting March 2025
ISLAMABAD: In an effort to provide significant relief to consumers, the government is poised to announce a major cut in electricity tariffs, with Power Distribution Companies (Discos) filing petitions for a negative adjustment of up to Rs 52.123 billion (approximately Rs 2 per unit) for the second quarter of FY 2024-25 under the Quarterly Tariff Adjustment (QTA) mechanism.
This adjustment is expected to reduce electricity prices for millions of consumers across Pakistan, with the new rates coming into effect in March 2025. The National Electric Power Regulatory Authority (Nepra) is set to hold a public hearing on February 12, 2025, regarding these petitions filed by Discos through the Central Power Purchasing Agency Guaranteed (CPPA-G).
The requested negative adjustment is largely attributed to a difference in exchange rates (Rs 278/$ against a projected Rs 300/$) and a reduction in interest rates. The QTA will apply to electricity tariffs for March, April, and May, and it will replace the existing Paisa 19.5 per unit QTA, which expires on February 28, 2025.
In addition to this, Prime Minister Shehbaz Sharif has directed the Power Division to reduce electricity tariffs by Rs 7 per unit, especially benefiting the industrial sector, starting in April 2025. With this adjustment, the total reduction in electricity prices will amount to approximately Rs 9-10 per unit from April onward.
The government’s move includes terminating power purchase agreements (PPAs) with five Independent Power Producers (IPPs) and revising contracts with eight bagasse-fired IPPs and 15 other IPPs, expecting savings of Rs 137 billion annually. These savings are part of a larger strategy to cut energy costs by Rs 1.14 trillion, benefiting consumers. The new contracts have already been approved by the Federal Cabinet.
At a recent Federal Cabinet meeting, PM Shehbaz Sharif praised the efforts of Minister for Power Sardar Awais Leghari and Special Assistant to the Prime Minister on Power Muhammad Ali for renegotiating agreements with IPPs, which will result in the price reduction.
According to data provided by the CPPA-G to Nepra, the following Discos have requested negative adjustments for Q2 FY 2024-25: Islamabad Electric Supply Company (IESCO) - Rs 4.478 billion, Lahore Electric Supply Company (Lesco) - Rs 9.632 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 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.
Nepra has also confirmed that the third-quarter adjustment for FY 2024-25, based on policy guidelines from the federal government, will be applied to K-Electric consumers, though lifeline consumers already benefiting from subsidies will not receive relief from the QTA.