Pakistan’s average power generation costs rose by 33% month-on-month (MoM) in January 2024 to Rs 15.50 per KWh from Rs 11.70 per KWh in December 2023 mainly due to the hefty increases in generation from higher-costing thermal plants.
Power generation also increased by 9.1% in January to reach 8,314 GWh from the previous month but down 2.3% compared to the same period last year, when it was 8,515 GWh.
This increase follows lower generation levels in November and December 2023, which fell below 8,000 GWh due to reduced domestic and industrial demand.
Total electricity generation for the first seven months (July-Jan) of fiscal year 2024 remained unchanged at 77,189 GWh, influenced by economic conditions, energy prices, and a slight decrease in large-scale manufacturing.
Hydel power generation decreased by 50% month-on-month to 924 GWh in January 2024, its lowest in 12 months, accounting for 11.1% of total generation.
This drop is due to maintenance-related canal closures. Hydel generation is expected to recover to 20-25% in the coming months with the start of seasonal water flows.
Thermal power generation saw increases across the board to compensate for the reduced hydel output: RLNG generation increased by 19.4%, coal by 15%, and RFO by 3.5 times month-on-month.
The average cost of power generation experienced a sharp increase during January 2024, rising by 33% MoM, standing at Rs 15.50 per KWh compared to Rs 11.70 per KWh in December 2023.
The significant rise is primarily due to the hefty increases in generation from higher-costing thermal plants (RLNG, coal, and residual fuel oil (RFO)) and the concurrent decrease from cheaper fuel sources i.e. hydel.
More specifically, the cost of generation from RFO, RLNG, and gas-backed generators stood at Rs 37.6, Rs 24.7, and Rs 14.7 per KWh, higher by 23%, 19%, and 44% YoY.
The sharp increase in per unit prices of RFO and RLNG is majorly due to the depreciating exchange rate (PkR/USD: up 26%YoY), even though commodity prices of fuel oil (up 10%YoY) and RLNG (down 4.0%YoY) have remained largely stable.
Further, the higher cost of generation from indigenous gas may be linked to dual hikes in CY23, with gas prices rising from Rs 853 per MMBTU to Rs 1,053 per MMBTU, contributing to the increase.
Overall, the said exorbitant rise in energy costs during the month has resulted in the Central Power Purchasing Agency (CPPA) seeking Rs 7.13 per KWh as fuel charges adjustments (FCA) for consumer bills in March 2024.
