Islamabad: The year 2024 was not very pleasant in terms of energy prices. Although consumers got some relief in electricity prices, most of them had to face high prices.
Prime Minister Shehbaz Sharif’s government came to power on the promise of reducing electricity prices, but despite all its claims, it failed to provide relief to the people. The electricity price is still beyond the affordability of consumers.
Power distribution companies (DSCOs) are suffering from heavy losses, which is increasing the circular debt, which consumers are having to bear, and poor agreements with IPPs have added to the burden.
The government is working on improving the contracts with IPPs, the Prime Minister claimed that as a result of the review of the contracts with IPPs, electricity for industrial consumers has been reduced by Rs 11.33 per unit and electricity for domestic consumers by Rs 4.66 per unit from June 2024.
However, despite the government’s lofty claims, the price of electricity at Rs 44.04 per unit is far beyond the affordability of consumers, while the price of electricity reaches Rs 64 by including government taxes, the government is collecting more than 50 percent tax on electricity bills.
Circular debt has increased to Rs 2.636 trillion, which is 2.5 percent of the country’s GDP, which is much higher than the government’s target of limiting circular debt to Rs 2.31 trillion.
At the end of December 2023, the circular debt was Rs 2.551 trillion. Despite the government’s monthly and quarterly fuel adjustment increases, the circular debt continued to increase, the main reason for which is non-recovery of bills from consumers, transmission and distribution defects.
Meanwhile, after sharp increases in electricity prices, consumers are rapidly shifting to solar. According to statistics, more than 7,000 MW of electricity has been added to the system through solar panels.
According to officials, 80 MW of electricity is being added to the national grid through net metering every month, while the agricultural sector has completely shifted to solar. However, some signs of relief are being seen due to the government’s review of agreements with IPPs.
The government is trying to convince IPPs to end capacity payments. Capacity payments account for 70 percent of energy costs. The current cost of electricity generation is Rs 9.25 per unit, while consumers are paying Rs 18 per unit in capacity payments.
Power plants are being paid Rs 2.5 trillion annually in capacity payments without generating electricity. The government has so far terminated contracts with 5 IPPs, while talks are underway with 18 more.
