Reversing Electricity Tariff

 From 2022–2024 electricity prices in Pakistan rose by nearly 100%. Since then, they have further jacked up by another 45%, with the current base tariff for high‑tier domestic consumers (>700 units) now standing at PKR 57–58 per kWh. The root cause lies in the capacity charges paid to IPPs and the pressure of IMF programs to reduce subsidies. Pakistan’s electricity paradox is therefore not about a shortage of installed capacity but about underutilization and the way idle charges are passed on to consumers. Installed capacity in 2026 stands at around 46,600 MW, which translates to approximately 408 TWh annually, if fully utilized. Yet actual consumption is only close to 127.5 TWh, meaning system‑wide utilization is stuck at max 31%. This forces the government to pay IPPs about PKR 1.4 trillion annually for unused capacity, inflating tariffs to unsustainable levels.

It is important to clarify what this 31% utilization means. Out of the total installed potential of 408 TWh, IPPs are contributing about 20% of that potential, while hydro and nuclear together provide the remaining 10–11%. In other words, IPPs themselves are running at 35–40% of their own installed capacity.

If Pakistan were to achieve full utilization across all sources i.e. IPPs, hydro, and nuclear, tariffs could realistically fall to PKR 14–18 per kWh. Even at with 60–70% combined utilization, tariffs could drop to PKR 16–22, providing meaningful relief. Importantly, if we consider a scenario of 100% utilization without hydro or nuclear, relying only on IPPs, tariffs will still fall compared to today because idle capacity charges vanish. In that case, costs would be higher than the balanced mix but still substantially lower than current tariffs, landing around PKR 17–20 per kWh.

When we add up the realistic contributions with IPPs at 100% (408 TWh), hydro at 30% (122 TWh), and nuclear at 10% (41 TWh), the total billable electricity potential reaches around 571 TWh annually. This is more than four times current consumption. At that level, idle charges disappear, fixed costs are spread across a much larger base and tariffs settle in the PKR 14–18 range.

Cheaper electricity will substitute for other fuels. Domestic piped gas remains cheaper at PKR 4–5 per kWh equivalent, but electricity at PKR 14–18 becomes competitive against imported LNG (PKR 18–22) and cheaper than LPG (PKR 20–25). This means those relying on LPG cylinders would immediately benefit from switching to electricity, while industry dependent on LNG would find electricity a viable alternative.

The conclusion is straightforward: Pakistan must begin by lowering electricity tariffs. Cheaper tariffs will encourage households and industry to consume more power, reducing theft and shifting demand back to the grid. The government may have to absorb some fiscal pressure initially, but as utilization rises, idle capacity charges disappear, creating a cycle of affordability and competitiveness. With ~571 TWh of billable electricity available, tariffs can be brought down to PKR 14–18 per kWh, LPG users can enjoy cheaper energy, and industry can gain a decisive edge against imported fuels. Excess electricity at cheaper rates will also spur technological development, while villages that currently see no prospect of electrification for decades can finally be connected to the grid.

Scenario	Units Billed (TWh)	Idle Capacity Charges	Hydro/Nuclear Share	IPP Share (within mix)	Losses Impact	Base Tariff (PKR/kWh)	Total Available Billable Units
Current (31% utilization)	127.5	PKR 11–12	30% hydro, 10% nuclear	20% of system potential (90–95 TWh)	PKR 4–5	57–58	127.5 TWh
60% Utilization (combined mix)	245	PKR 4–5	30% hydro, 10% nuclear	~50% of system potential (~200 TWh)	PKR 2–3	18–22	245 TWh
70% Utilization (combined mix)	286	PKR 2–3	30% hydro, 10% nuclear	55% of system potential (225 TWh)	PKR 2–3	16–20	286 TWh
100% Utilization (all sources)	408	PKR 0	30% hydro, 10% nuclear	60% of system potential (245 TWh)	PKR 2–3	14–18	408 TWh
100% Utilization (IPP‑only)	408	PKR 0	0% hydro, 0% nuclear	100% IPPs (~408 TWh)	PKR 2–3	17–20	408 TWh
Total Billable Units (IPPs 100%, Hydro 30%, Nuclear 10)	—	PKR 0	30% hydro, 10% nuclear	100% IPPs (~408 TWh)	PKR 2–3	14–18	571 TWh

 

 

References

1. NEPRA Tariff Notifications (2022–2024) — Ministry of Energy (Power Division), Government of Pakistan.
• July 2022 hike (+7.91 Rs/unit)
• July 2023 hike (+7.50 Rs/unit + surcharge)
• July 2024 hike (+7.12 Rs/unit)
2. NEPRA Domestic Tariff Slabs (2026) — Current base tariff schedule showing >700 units slab at PKR 57–58 per kWh (exclusive of taxes).
3. NEPRA State of Industry Report 2023 — Installed generation capacity breakdown: Hydro 27%, Nuclear 8%, Thermal IPPs 43%, Renewables 7%. Total 43,513 MW.
4. Renewables First – Pakistan Electricity Review 2025 — Installed capacity 46.2 GW, generation 137 TWh, capacity payments
5. IMF Country Report (2024–25) — Notes on subsidy withdrawal, circular debt and tariff escalation pressures.
6. Private Power & Infrastructure Board (PPIB) — Portfolio of hydro and coal projects, confirming hydro/nuclear expansion pipeline.