Capacity Payments Continue to Haunt Electricity Consumers
Despite the current government’s revision of agreements with Independent Power Producers (IPPs), capacity payments continue to haunt electricity consumers, as power distribution companies (Discos) have sought to pass on a burden of Rs 34 billion — mainly on account of capacity payments — to consumers.
These payments are made for idle power plants that remained closed and did not generate electricity. Yet consumers who pay their bills regularly will be forced to absorb these hefty costs through the adjustment for the second quarter of 2026.
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Quetta Electric Supply Company (QESCO) has broken out of the vicious cycle of capacity payments after all agricultural tubewells in Balochistan switched to solar power.
Similarly, Multan Electric Power Company (MEPCO), which has nearly 50 percent of its agricultural tubewell connections in Punjab, saw a major portion of these tubewells shift to solar — causing a significant decline in its sales during the period under review.
During a public hearing conducted by the National Electric Power Regulatory Authority (NEPRA), all Discos reported a major decline in domestic-sector sales due to solarisation.
Representatives of the distribution companies also admitted they were enforcing load-shedding at night because they could not supply expensive electricity to consumers at subsidized rates.
The government had earlier shelved its net-metering policy to discourage consumers from shifting to solar. Under the new policy, the unit-exchange mechanism was scrapped in favor of net billing.
Despite this attempt to slow the shift to solarisation, all Disco representatives confirmed that domestic electricity sales had continued to decline.
A representative of the Faisalabad Electric Supply Company (FESCO) said the company had seen a 5 percent drop in electricity sales due to solarisation, though industrial electricity use had risen by 2 percent. He also acknowledged that load-shedding was being enforced even for paying consumers, despite the fall in demand.
An Islamabad Electric Supply Company (IESCO) representative said the company had sold 303 units less during the period under review, and confirmed that a major portion of the requested adjustment stemmed from capacity payments. She added that solarisation had also contributed to the sales decline.
Industry representatives rejected the proposed tariff increase, warning that raising power rates amid the current economic strain would place additional pressure on industry.
A NEPRA member said the country would have faced far worse load-shedding at present had it not been for the rise in solarisation. He added that Discos were now resorting to night-time load-shedding because of solar adoption, but rejected the notion that electricity sales had dropped due to solarisation alone.
The Discos collectively sought a total adjustment of Rs 33.778 billion for the second quarter of CY2026 (April–June). The request included Rs 46.380 billion in capacity charges, Rs 4.974 billion in variable O&M charges, and Rs 3.080 billion related to the impact of transmission and distribution (T&D) losses on monthly fuel cost adjustments.
These positive adjustments were partly offset by Rs 13.517 billion under the Uniform Tariff/Cross-Subsidy (UoSC) component from the Ministry of Finance, and Rs 21.175 billion due to the impact of the Incremental Consumption Package. In addition, Rs 14.231 billion was claimed as unrecovered cost of SPPs/CPPs.
Among individual Discos, SEPCO sought the highest net adjustment at Rs 13.724 billion, followed by PESCO (Rs 6.294 billion), FESCO (Rs 5.358 billion), MEPCO (Rs 5.090 billion), GEPCO (Rs 4.992 billion), IESCO (Rs 4.872 billion), LESCO (Rs 2.953 billion), and HAZECO (Rs 1.239 billion). In contrast, TESCO, QESCO, and HESCO posted negative adjustments of Rs 4.394 billion, Rs 3.647 billion, and Rs 2.083 billion, respectively.
