Power bills set to drop as capacity charges, fuel costs, interest rates fall

ISLAMABAD: Pakistani electricity consumers will see some relief in their power bills next month as the National Electric Power Regulatory Authority (Nepra) directed state-owned distribution companies (Discos) and K-Electric on Wednesday to refund Rs1.23 per unit in February 2025 bills.

Officials from the Power Division and Nepra anticipate that electricity tariffs will continue to decline in the coming months as capacity payments and fuel cost adjustments ease amid a stable rupee.

For Discos, the refund is based on the fuel charges adjustment (FCA) for December 2024, while for K-Electric, it applies to the FCA for November 2024.

Nepra Member (Tariff) Mathar Niaz Rana noted in an additional statement that K-Electric had originally requested a negative FCA of Rs4.98 per unit for November 2024. However, Nepra determined that the actual FCA should be negative Rs5.0 per unit (Rs7.21 billion).

The regulator withheld Rs5.44 billion pending scrutiny of Rs8.7 billion in costs linked to part load, open cycle operations, degradation curves and startup costs under KE’s MYT. Officials debated whether the full FCA relief should be passed on to consumers upfront or staggered across future determinations.

The refunds will apply to all consumer categories except lifeline consumers, domestic users consuming up to 300 units, electric vehicle charging stations, prepaid electricity users and agricultural consumers of all Discos. Domestic consumers with time-of-use (ToU) meters, regardless of consumption levels, will also benefit. If February 2025 bills are issued before Nepra’s notification, the refunds will be adjusted in the following month’s bills.

Meanwhile, during a public hearing on Wednesday, Nepra signaled that Discos, including K-Electric, may be required to refund another over Rs52 billion to consumers under the second quarterly adjustment for October-December 2024-25.

Nepra officials highlighted that the relief stems mainly from a Rs50.66 billion reduction in capacity charges. This decline is attributed to the termination of contracts for five thermal power plants and the suspension of Neelum-Jhelum hydropower project.

Officials also cited a relatively stable rupee-dollar exchange rate as a contributing factor to lower financial pressures. If approved, the tariff relief will extend to K-Electric consumers as well.

Nepra Member Mathar Niaz Rana pointed out that a significant drop in interest rates over the past few months has further contributed to the reduction in power costs. He stressed the need for detailed data submissions to Nepra for a comprehensive analysis.

Pakistan’s power sector circular debt stood at Rs2.393 trillion as of June 2024, declining slightly to Rs2.384 trillion by the end of December 2024, the official added.