An Interactive Roadmap to Lower Electricity Prices
An Interactive Roadmap to Lower Electricity Prices
Pakistan’s power sector is at a crossroads. This interactive plan outlines a data-driven, one-year
strategy to reduce consumer tariffs by tackling core structural issues: debt, tariff design, and market
competition.
Executive Dashboard: The Challenge &
Opportunity
Understanding the current landscape is the first step towards
meaningful reform.
Average Consumer Tariff (Mid-2025)
PKR 33 /
kWh
Potential Tariff Reduction
PKR 7-9 /
kWh
Projected BTM Solar (2027)
21+ GW
The Anatomy of a Power Bill
Fixed capacity payments, paid regardless of consumption, make
up over half of the total tariff.
The Daily Energy Reality (July 2025)
Abundant midday solar drives marginal costs near zero, while
evening peaks remain expensive, creating a “duck curve”.
Pillar 1: Moving Debt Off Electricity
Bills
The first step to tariff reduction is to
address the significant debt servicing costs, particularly from Chinese IPPs and nuclear projects,
embedded within the capacity payment component of consumer bills.
The Strategy: Ring-fence and Refinance
We propose creating a Special Purpose Vehicle (SPV) to take
over the debt of specific high-cost power plants. This SPV would be funded by the
Government of Pakistan through a dedicated, long-term, low-cost facility from the
World Bank.
This strategic move isolates these legacy debt costs from the
electricity tariff calculation (the CPPA basket), providing immediate and direct relief
to consumers without defaulting on sovereign commitments.
Projected Impact
~ PKR 5 / kWh Reduction
By removing principal and interest repayments from the
tariff calculation.
Annual Capacity Payments by
Fuel Source
A significant portion is tied to imported
fuel plants with foreign-denominated debt.
Pillar 2: Modernizing the Consumer Tariff
The rapid adoption of rooftop solar and
battery storage is fundamentally changing how consumers use the grid. The tariff structure must
evolve from a rigid, cost-plus model to a dynamic framework that reflects this new reality.
The Unstoppable Rise of Distributed
Energy
From Cost-Plus to Customer-Centric
The current tariff bundles all costs into a per-kWh rate,
penalizing efficient users and encouraging grid defection. The proposed structure unbundles
these costs for greater transparency and fairness.
OLD: Cost-Plus Tariff
A single volumetric charge
(PKR/kWh) that combines fixed costs (capacity, grid) and variable costs (fuel). This
masks the true cost of energy at different times of day.
NEW: Unbundled Tariff
1. Fixed Subscription Fee (PKR/kW/month)
A monthly charge based on sanctioned load, covering the
consumer’s share of fixed grid and capacity costs.
2. Variable Energy Charge (PKR/kWh)
A charge for energy consumed, linked to the real-time System
Marginal Cost. It’s cheap midday and higher in the evening.
Interactive Bill Calculator
See how the new tariff structure could affect a typical monthly
bill. The new structure rewards off-peak consumption and solar self-consumption.
Old Bill (Estimated):
PKR 9,900
New Bill (Simulated):
PKR 8,550
Potential Savings: 14%
Unleashing Virtual Power Plants (VPPs)
A VPP is a network of decentralized,
behind-the-meter batteries (in homes and businesses) that are aggregated and coordinated to
provide power to the grid during peak hours. This turns a grid threat into a valuable asset.
Shaving the Expensive Peak
By dispatching thousands of small batteries during the 6 PM –
10 PM peak, a VPP can reduce the need for expensive imported fuel-based power plants,
lowering the overall system cost and improving grid stability.
Pillar 3: Enabling a Competitive Wheeling
Framework
To foster long-term efficiency and price
discovery, the power sector must transition from a single-buyer model to a competitive market. A
robust and fair “wheeling” (or open access) framework is the cornerstone of this transition.
Current Model: Single Buyer
No competition, costs are passed through.
Proposed Model: Competitive Wheeling
Access)
Competition drives down prices for all.
Key Policy Actions:
- Auction Wheeling Capacity: Instead of fixed allocation, auction the
available 800 MW transmission capacity in smaller blocks (e.g., 50 MW) to ensure fair
market-based pricing. - Empower DISCOs: Allow Distribution Companies (DISCOs) to act as
competitive suppliers, procuring power from the cheapest sources to serve their
customers. - Clarify Stranded Costs: Clearly identify and quantify any stranded
network costs for wheeling transactions, and introduce a 3-5 year sunset clause to phase
them out, preventing them from becoming a barrier
to competition.
Action Plan: A One-Year Roadmap
Achieving these reforms requires a
focused, time-bound execution plan. The following roadmap outlines key milestones for the next 12
months.
Quarter 1 (Months 1-3)
with World Bank
for refinancing facility. Form SPV legal framework.
unbundled
tariff structure design. Draft licensing framework for VPP aggregators.
wheeling framework
with auction mechanism.
Quarter 2 (Months 4-6)
approval.
Finalize debt transfer agreements with relevant IPPs.
campaign for new
tariff. Start VPP aggregator licensing process. Conduct pilot VPP projects in
LESCO/IESCO.
200 MW of
wheeling capacity.
Quarter 3 (Months 7-9)
debt. NEPRA to
hold hearing for tariff adjustment reflecting debt removal.
tariff for
industrial and commercial consumers. Scale up VPP enrollment.
capacity auction.
Publish performance report of the new framework.
Quarter 4 (Months 10-12)
in consumer
bills.
new tariff for
residential consumers. Achieve 500 MW of dispatchable VPP capacity.
wheeling charges and
stranded cost sunset clause based on market data.