Power sector circular debt slashed by Rs780bn

ISLAMABAD: Pakistan has slashed its power sector circular debt by Rs780 billion to Rs1.614 trillion, a move government credited to lower line losses, improved bill recovery and savings from renegotiated Independent Power Producer (IPP) contracts.

The Power Division disclosed the reduction to the National Electric Power Regulatory Authority (Nepra) during a public hearing on distribution companies’ (Discos) petition for the fourth-quarter tariff adjustment (QTA) of last fiscal year. Officials said better Disco performance saved Rs200 billion, with other interventions trimming costs further.

But industrialists warn the relief could be short-lived, accusing the government of using bank loans to wipe arrears. Power division official said that Rs1.275 trillion more is being raised from banks to pare down circular debt, adding the borrowing would not require the imposition of any separate surcharge for repayment.

While hearing the Discos’ case of QTA, the power regulator said electricity consumers could see a Rs1.8 per unit cut under the April–June 2024-25 QTA. If it was approved, then Discos will have to refund Rs53.393 billion, including K-Electric customers. The cut stems from a Rs53.7 billion drop in capacity payments and Rs662 million in transmission gains, partially offset by Rs182 million in maintenance and Rs804 million in system fees.

The hearing also highlighted contradictions between official data showing a 49 per cent jump in industrial power consumption and industry’s claims of factory shutdowns. Nepra Member Maqsood Anwar questioned, “If industries are consuming more power, why are they claiming closures?”

Officials said four power plants and the Neelum-Jhelum hydropower project remained offline, yet consumption grew as industries shifted captive power generation to distribution companies (Discos). Nepra sought a detailed briefing on the load shift. However, the closure of the Neelum-Jhelum Hydropower Plant adversely impacted the sector by Rs18 billion.

The session revealed 128,000 new connection applications pending nationwide, representing 1,070 megawatts of potential load, along with 4,000 pending net metering requests, half of them in Faisalabad Electric Supply Company (Fesco). Nearly 70,000 defective meters also remain in use.

Quetta Electric Supply Company (Qesco) Chief Executive Officer disclosed that 13,000 to 14,000 tube well connections have been disconnected in line with the prime minister’s directive to shift agricultural tube wells to solar energy. “This has reduced electricity consumption in our service area,” the CEO said. The Nepra said that it will issue its final QTA decision after reviewing data and stakeholders’ feedback.