NEPRA Reviews Rs22.98 Electricity Package as Costs Surge

ISLAMABAD: The Power Division has asked for a review of the Rs22.98-per-unit incremental electricity tariff package for industrial and agricultural consumers after marginal generation costs rose well above the fixed rate, potentially shifting additional costs onto other electricity users.

The National Electric Power Regulatory Authority (NEPRA) held a public hearing on Monday on the Power Division’s request to reconsider the incremental consumption package available to industrial and private agricultural consumers served by XW-DISCOs and K-Electric.

The package covers both Time-of-Use (ToU) and Non-Time-of-Use consumers and applies to additional electricity consumed during both peak and off-peak hours.

During the hearing, the Power Division said the fixed tariff of Rs22.98 per kilowatt-hour (kWh) had come under considerable pressure because marginal electricity costs exceeded the package rate in several months.

According to the presentation submitted to NEPRA, the weighted average marginal cost between December and May was Rs27.58/kWh, considerably higher than the package tariff. After accounting for transmission and distribution losses, the weighted average marginal cost increased to Rs31.83/kWh.

The cost gap became particularly pronounced in April and May. Average marginal costs reached Rs36.71/kWh in April and Rs33.98/kWh in May. After adjusting for losses, the figures increased to Rs42.37/kWh and Rs39.22/kWh, respectively.

This meant that April’s loss-adjusted marginal cost was Rs19.39 per unit higher than the package tariff, while the difference in May stood at Rs16.24 per unit.

The Power Division told the hearing that, subject to regulatory approval, the gap between the fixed package rate and the higher marginal cost was effectively being borne by other electricity consumers.

The package also includes a consumption-growth safeguard that requires a review if combined industrial and agricultural electricity consumption rises more than 25% above the established baseline.

Data presented at the hearing showed that the threshold was exceeded in January, February and April, when consumption growth reached 25.13%, 26.20% and 34.81%, respectively. Growth in the remaining months stayed below the 25% trigger.

A separate semi-annual review mechanism provides another basis for changing the tariff. Under the mechanism, the package is reviewed to maintain alignment between costs and revenues, while marginal tariffs can be adjusted where necessary.

The scheme is supposed to end if an upward tariff adjustment is required in two consecutive reviews.

The Ministry of Energy’s Power Division was expected to provide the necessary information after stakeholder consultations held during the first week of June 2026. However, the relevant raw data was ultimately submitted to NEPRA on July 29.

Following consultations, NEPRA asked the Power Division to submit a proposal. The division responded on September 9, requesting the regulator to initiate proceedings on the issue.

The presentation showed that the six-month weighted average marginal rate had reached approximately Rs32/kWh, while four months of the second review period had already elapsed. This raised questions over whether the existing package should be modified or suspended as marginal electricity costs remain significantly above the fixed tariff.

The data also revealed different effective break-even prices across consumer categories. For B1 peak consumers, the break-even rate was Rs31.15/kWh, while B2 Time-of-Use consumers had an effective break-even price of Rs29.05/kWh. The rates for B3, B4 and B5 consumers stood at Rs30.03/kWh, Rs29.62/kWh and Rs32.91/kWh, respectively.

These figures place the existing Rs22.98/kWh package tariff below the calculated break-even price for every category presented before the regulator.

NEPRA will now determine whether the existing tariff still reflects the actual cost of supplying incremental electricity to participating industrial and agricultural consumers and whether the rate should be revised or the package suspended under its termination provisions.

During the hearing, intervener Rehan Javed proposed that the package tariff be increased to the actual marginal cost with effect from June 2026.

He also requested that the difference between marginal prices and the amount previously charged be refunded to consumers who did not benefit from the package since June. He proposed recovering the difference from package beneficiaries through the revised tariff, with any remaining amount recovered from the Government of Pakistan as the scheme's sponsor.

Another intervener, Amir Sheikh, raised concerns about the package’s cross-subsidy impact, arguing that it was placing additional pressure on domestic and commercial consumers while effectively allowing a smaller group of beneficiaries to receive subsidised electricity.

Sheikh also questioned whether the package remained necessary after the introduction of the gas levy and the subsequent conversion of captive power consumers to the national grid.

He argued that the implementation of the gas levy had already pushed captive power users toward the national grid, reducing the justification for continuing the package.

Sheikh further said that simultaneously implementing load-shedding while providing lower-cost electricity packages to industrial and agricultural consumers was contradictory.

He ultimately called for the package to be suspended.