The National Electric Power Regulatory Authority (NEPRA) received startling revelations during a Tuesday hearing that capacity payments will dominate Pakistan's power purchase costs in 2026, potentially accounting for up to 61% of the total price consumers pay for electricity.
Massive Capacity Payments Projected
The Central Power Purchasing Agency (CPPA-G) presented data showing that capacity charges are projected to range between Rs1.975 trillion to Rs2.022 trillion out of the total projected Power Purchase Price of Rs2.992 trillion to Rs3.098 trillion for Calendar Year 2026. These calculations were presented under five different scenarios accounting for variations in demand, exchange rates, fuel prices, inflation, and borrowing costs.
During the hearing chaired by Wasim Mukhtar, CPPA-G submitted a petition indicating that the power purchase price per unit could range between Rs25.69 and Rs26.53 across the five scenarios. The capacity payment component alone is projected to be between Rs15.45 and Rs16.07 per unit.
Regulatory Skepticism and Industry Concerns
The CPPA's presentation immediately faced skepticism from NEPRA officials. NEPRA member Rafiq Ahmed Sheikh declared the submission incomplete and deficient, raising serious questions about the accuracy of the underlying data used for these projections.
Industry representatives voiced strong objections to the proposed rates. Rehan Javed from the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) stated that electricity is unlikely to become cheaper with these power purchase prices, warning that high energy costs would severely damage industrial competitiveness.
Tanveer Bari, representing the Karachi Chamber of Commerce and Industry, urged the regulator to exercise caution, specifically requesting that the "dollar exchange rate not be inflated excessively" in final calculations. He emphasized that a weaker rupee significantly increases power generation costs for everyone.
Economic Assumptions Behind Projections
The CPPA's calculations assume an exchange rate between Rs280 and Rs300 per US dollar, inflation at 7.74 percent, and KIBOR around 11 percent. These economic parameters form the basis of their five-scenario analysis presented to the regulator.
Notably, NEPRA had previously determined the power purchase cost at Rs25.98 per unit for the first half of FY 2025-26, providing context for the current projections.
NEPRA has indicated it will consult with industry stakeholders before making a final decision on the power purchase price. The regulator plans to thoroughly review the CPPA's data amid growing concerns about the impact of high capacity payments on Pakistan's economy and industrial sector.
