Pakistan Faces Bill of Rs 360 Billion PKR (Approximately $1.25 Billion) to Chinese Power Producers

Pakistan’s National Electric Power Regulatory Authority (Nepra) conducted a public hearing in response to the central power purchasing agency’s (CPPA) request to recover an additional PKR 28.3 billion or PKR 1.83 per unit fuel cost adjustment in Discos’ tariffs for electricity consumed in August. It was noted during the hearing that several cost-effective power plants remained underutilized due to transmission constraints, ultimately placing an unnecessary burden on consumers.

The power regulatory authority is currently analyzing and reconciling data and is expected to announce its decision in the coming days.

According to CPPA’s report, the cost of electricity in August this year was cheaper at about PKR 8.29 per unit compared to PKR 9.9 per unit in the same month last year, primarily due to increased generation from local resources.

Representatives of the CPPA reported that payables to Chinese independent power producers (IPPs) amounted to approximately Rs 360 billion. However, they were uncertain about the total amount of receivables and default amounts recoverable from public and private sector consumers. Members of Nepra pointed out that the higher fuel cost adjustment (FCA) occurred despite a 26% increase in the annual base tariff in July of this year, which set the reference fuel tariff for the current year.

It was highlighted that approximately 3,000MW of relatively cheaper electricity generated in the south of Pakistan, including Thar coal, wind, and solar power, could not be transmitted to consumption centres in the north due to transmission constraints. As a result, more expensive furnace oil-based plants had to be operated to meet a 13% higher demand. Concurrently, consumers in Karachi experienced heavy load shedding.

Hydropower generation contributes the highest percentage to Pakistan’s total power grid at 38%, followed by LNG-based power generation at 17.17%. Nuclear power generation contributes 12.79%, and local coal-based generation provides 10.3% of the country’s power supply.

This marks the first time that Nepra has begun separately reporting local and imported coal-based power generation, revealing a significant difference. In July of this year, cumulative coal-based generation (local and imported) stood at 14.69%, compared to a 17.75% share in June.

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Power supply from domestic gas continued its decline, contributing just 7.60% to Pakistan’s grid in August, down from 7.61% in July, 8.54% in June, 10.35% in May, and 12% in April.