Electricity Rates to Surge by Up to Rs 5.7 per Unit in 2024-25

Consumers are set to face another increase in electricity rates, up to Rs 5.7 per unit, for the financial year 2024-25.

The average tariff will rise from Rs 29.78 per unit to Rs 35.5 per unit following the National Electric Power Regulatory Authority (Nepra)’s recent decision. This hike will affect domestic, industrial, and commercial consumers, already burdened by high inflation.

A key factor in this decision is the increase in the power purchase price, which will be Rs 27 per unit for the next financial year, up from Rs 22.90 per unit this year. Nepra raised the power purchase price by 17.9% for FY 2024-25.

Honest consumers, who pay their bills regularly, will contribute Rs 2,116.250 billion as capacity charges, translating to Rs 17.66 per unit, and Rs 9.69 per unit in energy charges.

The total Power Purchase Price (PPP) of XWDISCOs, excluding KE’s share, amounts to Rs 3,277.506 billion, comprising Rs 1,161.257 billion for fuel and variable O&M costs and Rs 2,116.250 billion for capacity charges.Electricity Production in March 2024 Down 8.2% MoM

Nepra observed that CPPA-G projected growth under three scenarios: 3%, 5%, and 10%. However, actual demand in FY 2022-23 and FY 2023-24 showed negative growth, with a 10% decrease in FY 2022-23 and a slight 1.5% drop in FY 2023-24.

KE’s electricity share from the National Grid is expected to rise to 11,030 GWh during FY 2024-25. Thus, XWDISCOs’ demand growth is anticipated to be less than CPPA-G’s projections.

The IMF data mapper report indicates GDP growth will increase to 3.5% for FY 2024-25, up from 2.38% in FY 2023-24, with inflation expected to decrease significantly.

However, Nepra deems CPPA-G’s 5% and 10% demand growth assumptions as overly ambitious, opting for a more conservative 3% growth rate for FY 2024-25.

Exchange rate parity significantly affects electricity prices in Pakistan. Power sector costs are dollar-indexed, making exchange rate fluctuations critical. CPPA-G projected an exchange rate of PKR/USD 275 to 300, with the prevailing rate around Rs 279/USD as of June 2024. Historically, the PKR has devalued by about 10% annually against the USD, potentially exceeding Rs 300/USD if trends continue. Nepra considers CPPA-G’s Rs 300/USD projection reasonable.

During public hearings, APTMA and FPCCI criticized the lack of industry consultation for demand scenarios and highlighted the unrealistic nature of CPPA-G’s 3-5% demand growth assumptions, given the declining power consumption.

They argued that the exchange rate assumption of Rs 275/USD is problematic, given the consistent higher rates, and called for revisiting RLNG pricing assumptions due to global oil price trends and long-term LNG contracts indexed to international oil prices.