Why Electricity Costs in Pakistan Have Soared: Key Insights and Future Outlook
Rising Costs of Independent Power Producers (IPPs)
Energy Minister Awais Leghari revealed in a recent Senate Standing Committee on Energy meeting that the cost of electricity from Independent Power Producers (IPPs) has skyrocketed. A unit of electricity that cost Rs. 3 in 2016 now costs Rs. 285, reflecting a staggering 9600% increase over eight years.
Government’s New Approach
The government has announced a shift in policy, stating that it will no longer purchase electricity directly from IPPs. Instead, consumers will buy electricity directly from the producers. This change is aimed at addressing the ongoing protests and concerns surrounding IPP agreements.
Concerns and Criticisms
The committee chairman highlighted widespread protests against IPPs and called for a forensic audit of these agreements. Questions were raised about capacity charges and the underperformance of plants, which are operating below 70-80% capacity. There are discrepancies between regional agreements and the terms of existing IPP agreements.
Committee Insights
Senator Shibli Faraz expressed concerns about potential fraud and criticized the Ministry of Energy for contributing to the high electricity costs. He noted that Pakistan produces the most expensive electricity in the region. The Energy Secretary reported that, despite an installed capacity of 42,000 megawatts, actual production is limited to 132 billion units annually due to low demand.
Future Projections
The Energy Secretary also noted that electricity prices are expected to rise from 2025 to 2027 as the government reviews upcoming power projects. The government is considering selling the Nandipur and Guddu power plants and will not be purchasing electricity directly in the future. The cost of maintaining power plants, such as the Sahiwal Power Plant, has significantly contributed to the rising electricity prices.
