No big cut in base power tariff likely for FY26
ISLAMABAD: Against high hopes, the government has sought revision in the base electricity tariff for next fiscal year, proposing only 30 paise to a maximum of Rs2.25 per unit reduction in consumer rates under seven different scenarios.
Only in one unlikely case of normal circumstances and stable exchange rate at Rs280, the average base tariff would reduce by Rs2.25 per unit in fiscal year 2025-26 to Rs24.75 from prevailing rate of about Rs27 per unit.
In case of local currency depreciation to Rs300, the base tariff reduction would be around 30 paise per unit. The reduction mainly stems from lower capacity payments.
The average Power Purchase Price (PPP) would be on top of about Rs8.16 to Rs9.52 per unit fuel cost, taking the total electricity price to range between Rs34 and Rs35 per unit excluding taxes, fees, duties and surcharges.
30 paise to Rs2.25 reduction depends on rupee-dollar parity
The Central Power Purchasing Agency (CPPA) of the Power Division has formally submitted a request for projected PPP for the next fiscal year from July 1 to determine the consumer-end tariff.
The National Electric Power Regulatory Authority (Nepra) has arranged a public hearing on May 15 to review the request in consultation with all stakeholders and give its determination for implementation by the government.
The CPPA request outlined seven scenarios developed through sensitivity analysis of key assumption parameters, specifically demand, hydrology, fuel prices, and exchange rates. Across the analysed scenarios, indigenous fuels constitute 55pc to 58pc of the overall energy mix, while clean fuels contribute between 52pc and 56pc.
The worst-case scenario — marked by a high exchange rate of Rs300, low hydrology, standard fuel prices, and normal demand — yields the highest projected PPP at Rs26.70/kWh against Rs27.
In contrast, the best-case scenario assumes normal demand and an exchange rate of Rs280, resulting in the lowest PPP at Rs24.75/kWh, primarily due to reduced capacity charges.
Electricity demand is projected to grow between 3 and 5pc in all cases, but only if the exchange rate remains stable at Rs280. The exchange rate has been assumed to be Rs300 in all six other cases. In addition, US inflation has been taken at 2pc, Pakistan inflation at 8.65pc besides 11.9pc Karachi Interbank Offered Rate, 4.07pc international interest rate, and transmission losses at 2.80pc.
The Nepra determination would be taken to the federal cabinet for approval and subsidy allocation, and the power division would file a follow-up tariff table to Nepra for subsidy punching for various consumer categories and slabs before formal notification with effect from July 1 as already committed to the International Monetary Fund.
Published in Dawn, May 8th, 2025