Voice of Urdu - وائس آف اردو

Nepra report flags surplus capacity behind high tariffs

Editorial Team

Surplus generation capacity, low plant utilisation, high fixed costs and inefficient dispatch are persistently pushing up electricity tariffs in Pakistan and draining the power sector and the federal budget, according to the National Electric Power Regulatory Authority (Nepra) in its Annual Report on the Performance of Power Plants in Pakistan FY2024-25.

The report attributes today’s cost pressures to structural issues in how capacity has been added and used—where capacity payments dominate power purchase costs even as cheaper indigenous sources remain under-dispatched—while transmission bottlenecks and outages further reduce the system’s ability to move and dispatch lower-cost electricity.

Key developments

Nepra said the sector’s high fixed costs, low utilisation and inefficient dispatch “collectively resulted in higher electricity tariffs and financial stress on the power system.”
During FY2024-25, thermal power plants recorded an overall utilisation of 42.5%, while renewable energy plants averaged 36.6%.
The regulator said underutilisation alongside excess installed capacity raised per-unit costs mainly through higher capacity payments.
Total power purchase cost (excluding electricity imports from Iran) was Rs2.943 trillion, with 61% as capacity purchase price (CPP) and 39% as energy purchase price (EPP). Average CPP was Rs14.3/kWh and EPP Rs9/kWh.
Nepra attributed elevated CPP mainly to surplus capacity and low utilisation, while EPP was driven by reliance on imported fuels including RLNG, residual furnace oil and imported coal.
Cheaper indigenous sources—nuclear, Thar coal and local gas—were described as lower-cost but underutilised, limiting potential savings and increasing reliance on expensive imported-fuel plants through fuel price adjustments.
Transmission bottlenecks and grid constraints restricted the flow of cheaper power from the southern region to demand centres in the north, increasing reliance on higher-cost plants.

Context and background

Nepra said an economically sustainable power sector requires evaluating financial and economic consequences before adding new generation capacity. It warned that expanding capacity without assessing cost-effectiveness and expected utilisation can leave underused assets on the system and raise consumer electricity costs through higher fixed charges.

The report urged a balanced strategy that accounts for long-term factors such as CPP, EPP and grid stability, and incorporates flexible solutions—including renewable energy alongside more cost-efficient technologies—so installed capacity better matches actual demand and can be dispatched efficiently.

Details and evidence

Underuse of lower-cost indigenous plants

Nepra cited the Uch Power and Uch-II plants—operating on dedicated gas fields—as having generation costs of around Rs13.4/kWh during FY2024-25, while utilisation factors stood at 80.9% and 71.6%, respectively, against availability factors of 92.4% and 95.7%. Although ranked high in the economic merit order, their limited utilisation restricted potential system savings, the report said.

The regulator also warned that depletion of the Uch Gas Field, described as a mature reservoir, could pose risks to future sustainability of these plants, making proactive fuel-supply management important for reducing costs and maintaining energy security.

Thar coal utilisation and rail link delays

Thar coal-based power plants operated at an average utilisation of 72.9% in FY2024-25 despite competitive energy costs, Nepra said, adding that underutilisation contributed to dispatch of more expensive imported-fuel plants.

The report noted that Lucky Electric Power Company Limited (LEPCL) planned a transition from imported coal to indigenous Thar coal that depends on coal supply availability and completion of the Thar Rail Link Connectivity Project being implemented by Pakistan Railways. LEPCL raised concerns about delays: while Segment-I is expected to be completed by June/July 2026, Segment-II—including a branch line and a common coal unloading facility at Port Qasim—remains pending and has not entered the construction phase.

According to LEPCL, delays in Segment-II could impede transport of 10–12 kilotonnes per day of Thar coal needed for operations, requiring continued reliance on imported coal until both segments are operational, and potentially leaving Segment-I investment underutilised if the segments are not completed in a synchronised manner.

Outages, curtailment and additional costs

Nepra said prolonged outages at the Neelum Jhelum Hydropower Plant and the Guddu 747MW unit weakened cost efficiency. It also reported renewable energy curtailments due to intermittency and evacuation limits, leading to non-project missed volume payments of more than Rs13 billion.

Varying load and intermittent renewable generation increased part-load operations of thermal plants, adding Rs44.6 billion in partial load adjustment costs during FY2024-25, the report said.

K-Electric drawl from national grid

The regulator confirmed the technical feasibility of drawing 2,000MW from the National Grid under the existing configuration, but said K-Electric’s operational and commercial arrangements—including a “Take-or-Pay” RLNG gas supply agreement for Bin Qasim Power Station-III and related part-load charges—continue to influence its generation mix and power drawl patterns.

Current status / what happens next

Nepra concluded that long-term sustainability will require optimising generation capacity in line with actual demand, prioritising low-cost indigenous fuels, expediting transmission upgrades to remove regional constraints, restoring non-operational low-cost plants, and more rigorously assessing the economic implications of future capacity additions.

On the coal-transition infrastructure, the report cited expectations that Segment-I of the Thar rail link would be completed by June/July 2026, while Segment-II had not entered construction at the time described—leaving the timeline for enabling large-scale coal transport to Port Qasim dependent on progress on the pending segment.