Electricity Prices to Increase by 25% Starting July 2024
The Pakistani government is set to increase electricity prices by approximately 25% starting July 1, 2024. This move aims to generate around Rs4 trillion for power companies in the fiscal year 2024.
The National Electric Power Regulatory Authority (Nepra) has scheduled a public hearing for May 23 to discuss a proposal from the Central Power Purchasing Agency (CPPA). The CPPA, representing the power sector, is seeking to raise the power purchase price (PPP) by Rs4.40 to Rs6.51 per unit for the upcoming year.
The Central Power Purchasing Agency (CPPA) has projected varying estimates for electricity sales in 2024, anticipating between 131,000 to 139,000 gigawatt hours (GWh) with a demand growth of 3% to 5%. The proposed increase in the power purchase price (PPP) ranges from Rs4.40 to Rs6.50 per unit, averaging an increase of Rs6.80 per unit. This adjustment would raise the average price to Rs32.75 per unit from the current Rs26 per unit.
Including distribution margins and other adjustments, the average electricity price for the next year is expected to be Rs37 per unit, up from Rs29.78 per unit this year, reflecting a 25% increase. The energy purchase price (EPP) is projected to rise by nearly 50%, from Rs840.5 billion this year to between Rs1.16 trillion and Rs1.26 trillion next year, translating to an increase from Rs7.63 to Rs11.45 per unit.
The capacity payment price (CPP) is also expected to increase by 16%, from Rs17 per unit to Rs19.8 per unit, bringing total capacity payments to approximately Rs2.2 trillion, up from Rs1.87 trillion this year.
Additionally, around 66 paise per unit will be added for transmission and other service charges.
For this year, the base power purchase price approved by the National Electric Power Regulatory Authority (Nepra) is Rs20.60 per unit, setting the base rate for distribution companies at Rs23 per unit. Including distribution margins, the average sale rate for consumers is Rs29.78 per unit, excluding taxes and surcharges.
These increases are driven by the revenue requirements of various distribution companies and are part of a strategy to manage circular debt, which will be approved by the International Monetary Fund (IMF) as part of a bailout package.
To prepare their 2024 estimates, the CPPA consulted with various organizations such as Nepra, the Power Division, and K-Electric. They also collected data on electricity demand, fuel prices, and other relevant factors to ensure a comprehensive and collaborative process.