Islamabad, Jan 17 (.) Pakistan’s power sector, already bereaved by financial woes continues to remain trapped in a cycle of inefficient management, and wastefulness, that continues to exacerbate the country’s energy market, with electricity prices soaring for consumers despite ample generation capacity, according to a stark new assessment by the country’s regulator NEPRA.
The State of the Industry Report 2025 released by National Electric Power Regulatory Authority (NEPRA) finds that weak distribution companies, transmission bottlenecks and rigid power contracts added hundreds of billions of PKR to circular debt during fiscal year 2024–25, while households and businesses paid the price through inflated tariffs.
Electricity demand peaked at just over 33,000 megawatts during the year, far below the installed capacity of more than 41,000 megawatts. Yet large power plants remained idle while still being paid under long-term contracts, a cost that flowed directly into consumer bills.
At the same time, congested transmission lines prevented cheaper electricity from efficient plants from reaching the grid, forcing reliance on more expensive sources.
NEPRA said combined transmission and distribution losses at public-sector utilities reached around 16.4%, well above the allowed limit of 11.77%.
These losses—stemming from theft, outdated infrastructure and poor maintenance—are routinely passed on to paying customers instead of being absorbed by utilities.
Revenue recovery remains another impediment, as distribution companies collected only about 93.5% of billed amounts, creating a massive gap between expected and actual revenue.
NEPRA estimates that poor Disco performance alone added roughly PKR397 billion (about $1.4 billion) to circular debt in 2024–25, deepening the system-wide pile-up of unpaid obligations stretching from fuel suppliers to power producers.
The regulator warned that inefficiency has become embedded in the tariff framework itself.
Losses caused by poor performance are regularly adjusted into electricity prices, while utilities face little meaningful penalty for missing targets—blunting incentives for reform.
Furthermore, transmission failures compound the problem even more, as several major lines remain underused because of delays and technical constraints, even though payments are made as if they were fully operational.
This blocks low-cost power from reaching consumers and inflates overall system costs.
Long-term “take-or-pay” contracts with power producers remain a heavy burden. Under these agreements, the government must pay plants even when electricity is not dispatched.
Although contracts covering about 2,829 megawatts of unused capacity were terminated—moves NEPRA says could save more than PKR900 billion ($3.2 billion) over time—the financial relief will be gradual.
Consumers are already feeling the strain, with NEPRA recording a rise in complaints over overbilling, faulty meters and prolonged outages, while high costs are pushing households and businesses toward rooftop solar to escape unreliable and expensive grid power.
As of June 30, 2025, installed capacity stood at 41,121 megawatts, down from 45,888 a year earlier following the retirement of inefficient plants, partly offset by new hydropower.
However, underutilisation remains a persistent problem, as thermal and nuclear plants averaged a utilisation rate below 39%, keeping capacity payments stubbornly high.
The result is a tariff structure dominated by fixed costs. Capacity payments averaged PKR14.21 per unit, accounting for the bulk of consumer electricity prices—an outcome NEPRA says reflects systemic mismanagement rather than a lack of power.
. . JRC