Govt attributes rising electricity cost to growing solar energy usage

ISLAMABAD: The government on Thursday attributed the escalating electricity costs in Pakistan to the growing shift of power consumers to solar energy, coinciding with a significant drop in demand for grid-based power.

These remarks came from the National Transmission and Dispatch Company (NTDC) during a public hearing by Nepra on the Discos’ request for Rs4.99/unit positive fuel charges adjustments (FCA) for February 2024. The authority reserved its verdict.

NTDC officials informed that there is a surge in the use of solar energy across the nation. Due to the increasing solarization, electricity is becoming more expensive. Only in Lahore, it has been observed that every other household is installing a solar system, officials noted.

The authority responded that with the rising costs of electricity, solar energy is proving to be a convenient alternative for the public.

The regulator sought a report on the reduction in electricity demand in various sectors. Nepra Chairman Waseem Mukhtar asked that the restructuring of the energy sector is necessary to increase electricity demand.

He also said that consumers using less than 400 units are being provided with a subsidy of Rs592 billion. “Is the current tariff structure sustainable?” questioned the NEPRA Chairman. The government should reconsider the tariff structure to boost business activities, he suggested.

The regulator also expressed disappointment revealing that repeated appeals made by NEPRA to address the alarming decline in electricity demand had been neglected by the Central Power Purchasing Agency (CPPA).

It underscored a pressing concern regarding a staggering 36 percent decrease in the utilization of local coal for electricity generation. This sharp decline has resulted in a surge in import bills and a consequent escalation in electricity costs across the nation.

The petition (CPPA) on behalf of Discos, informed that during February 2024, the electricity demand declined by 12.2 percent. In previous months too, there were significant declines in demand.

Nepra member Rafique Ahmad Shaikh lamented that CPPA has left the Nepra unheard, despite multiple requests to take measures to increase electricity demand. “In the past few months, the use of local coal in electricity generation has decreased by 36 percent,” Sheikh added. This has led to an increase in import bills, making electricity expensive and capacity payments higher.

Electricity generation from LNG has increased by 100 percent. Thermal power plants are producing 35 percent of the electricity. These plants have 65 percent capacity payments, Sheikh said.

NEPRA member Muttahir Niaz Rana also emphasized the need to devise practical strategies to reduce capacity payments.

The National Transmission and Despatch Company (NTDC) said that when the plants operated by LNG were installed, they were cheap. Now, those same plants are producing expensive electricity, NTDC officials said. But, it is essential to stabilize the electricity system to operate the plants. In the country, the NTDC system has been built for 26,000 megawatts, officials said. The population is increasing, but electricity demand is decreasing, NTDC officials said. “We are not a poor country; we have administrative weaknesses,” said Sheikh.

Power Division voiced concern about rising electricity costs, noting the uncontrollable influence of foreign exchange rates. He disclosed that the government has to collect Rs1.2 trillion from electricity consumers. This is a kind of ‘running permanent default’.

However, he said that from September 7, 2023 to March 25, 2024 electricity theft worth Rs116bn has been prevented and through the crackdown on the electricity theft campaign, Rs85.9bn has been recovered.