61% of Pakistan’s Rs2.94 trillion power bill in FY25 went to capacity payments: report

Pakistan’s power sector paid Rs2.94 trillion for electricity in FY2024-25, with a majority of the cost linked to fixed capacity payments despite low plant utilisation, according to a performance evaluation report by the National Electric Power Regulatory Authority (Nepra).

The report shows that thermal power plants operated at an average utilisation rate of 42.5% during the year, while renewable energy facilities averaged 36.6%. Despite this underutilisation, 61% of the total power purchase cost — excluding imports from Iran — was allocated to Capacity Purchase Price (CPP), which represents fixed payments to producers regardless of actual electricity generation. The remaining 39% accounted for Energy Purchase Price (EPP).

On a per-unit basis, capacity payments averaged Rs14.3 per kilowatt-hour, compared to Rs9.0 per kWh for energy costs.

The report indicates that reliance on imported fuels such as RLNG, furnace oil and imported coal contributed to higher energy costs, even as some lower-cost domestic options were not fully utilised.

Part Load Adjustment Charges (PLAC), incurred when plants operate below full capacity, added Rs44.6 billion in additional costs. Renewable energy curtailments resulted in over Rs13 billion in Non-Project Missed Volume (NPMV) payments.

K-Electric’s system operated at an average utilisation of 34.6% during the year and continued to rely heavily on imported fuels. Although its interconnection with the national grid was energised in July 2025, enabling imports of up to 2,000 megawatts, existing “Take-or-Pay” RLNG commitments and related part-load charges continued to affect its generation mix.

Some lower-cost plants also operated below available capacity. Uch Power and Uch-II, which use local gas, generated electricity at about Rs13.4 per kWh but did not run at full availability. Thar coal plants, among the lowest-cost generators, averaged 72.9% utilisation, resulting in greater dispatch of higher-cost imported fuel plants.

Transmission constraints between the southern and northern regions limited the movement of cheaper power, while outages at certain plants further reduced efficiency. The report also noted that Lucky Electric Power Company Limited’s transition from imported coal to Thar coal depends on completion of a rail link, with delays potentially prolonging reliance on imported fuel.

Nepra’s findings highlight the financial impact of excess installed capacity, rigid fuel and capacity contracts, and system inefficiencies on tariffs and public finances.