Electricity Prices to Increase by 25% Starting July 2024

The government of Pakistan plans to raise electricity prices by about 25% from July 1, 2024. This is to help power companies make about Rs4 trillion in the fiscal year 2024.

Nepra (National Electric Power Regulatory Authority) will hold a public hearing on May 23. They will talk about a request from the Central Power Purchasing Agency (CPPA), which represents power companies. The CPPA wants to increase the power purchase price (PPP) by Rs4.40 to Rs6.51 per unit for the next year.

The CPPA has different estimates for how much electricity will be sold in 2024. They expect between 131,000 to 139,000 gigawatt hours (GWh) of electricity to be sold, with demand growing by 3% to 5%. The smallest increase in PPP is Rs4.40 per unit, and the largest is Rs6.50 per unit. On average, they want to raise it by Rs6.80 per unit, making the new average price Rs32.75 per unit, up from Rs26 per unit this year.

With added distribution margins and adjustments, the average price for electricity next year will be Rs37 per unit, up from Rs29.78 per unit this year, showing a 25% increase. The cost of buying energy (EPP) is expected to go up by almost 50%, from Rs840.5 billion this year to between Rs1.16 trillion and Rs1.26 trillion next year. This means the EPP per unit will rise from Rs7.63 to Rs11.45.

The capacity payment price (CPP) is also expected to go up by 16%, from Rs17 per unit to Rs19.8 per unit. This means total capacity payments will be close to Rs2.2 trillion, up from Rs1.87 trillion this year.

Additionally, about 66 paise per unit will be added for transmission and other service charges.

This year, the base power purchase price approved by Nepra is Rs20.60 per unit. This makes the base rate for distribution companies Rs23 per unit. Including distribution margins, the average sale rate for consumers is Rs29.78 per unit, not counting taxes and surcharges.

These increases are based on the revenue needs of different distribution companies and are part of a plan to manage circular debt, which will be approved by the International Monetary Fund (IMF) as part of a bailout package.

The CPPA made their estimates for 2024 after talking with several organizations, including Nepra, the Power Division, and K-Electric. They also gathered data on electricity demand, fuel prices, and other factors to ensure a thorough and agreed-upon process.