Pakistan’s electricity sector is in deep trouble. The recent nationwide blackout on the night of January 9 is just another reminder of the crisis facing the collapsing power sector. But for an average consumer, the most visible impact of this crisis has been their ever-increasing electricity bill.
A report published last week suggested that the government had decided to raise the base electricity tariff by Rs1.90 per unit from this month. The announcement, it is said, has been delayed in view of the increase in the fuel prices. The power price increase is agreed to bring the International Monetary Fund back on the table for the revival of the suspended $6 billion economic stabilisation deal with the multilateral lender.
Take the example of the Indicative Generation Capacity Expansion Plan (IGCEP) 2047 developed by the National Transmission and Despatch Company back in April last year. A review of the plan by Australia’s Institute for Energy Economics and Financial Analysis (IEEFA) warned that Pakistan would “risk locking” itself into expensive, long-term overcapacity as a result of over-optimistic energy demand growth forecasts.
“The government’s principle of affordability cannot be met if the power system is locked into long-term overcapacity. Capacity payments to plants lying idle are already an issue and will become even more unsustainable if more overcapacity is locked in,” the IEEFA study argued. In other words, the consumers will end up paying higher prices if the plan was implemented.