Nepra Hearing Reveals Significant Crash in Pakistan's Power Demand

In a significant development, the National Electric Power Regulatory Authority (Nepra) recently held a public hearing in Islamabad, revealing that electricity demand in Pakistan has officially crashed. This decline in demand is expected to overshadow any minor reductions in fuel costs anticipated for the upcoming month. The situation arises from the addition of a staggering 21,000 megawatts (MW) of generation capacity over the past six years, a figure that matches the total capacity added in the previous 70 years since the country’s independence in 1947.

The hearing, presided over by Nepra Chairman Waseem Mukhtar, included participation from three provincial members: Mathar Niaz Rana, Maqsood Anwar Khan, and Rafique Shaikh. During the discussions, it was noted that the National Transmission and Dispatch Company (NTDC) has been authorized to develop a substantial Rs352 billion investment plan over three years, aimed at addressing critical constraints in the electricity supply chain, particularly between generation centers in the south and load centers in the north.

Among the attendees was Dr. Fiaz Chaudhry, who previously served as the managing director of NTDC before being dismissed in May 2017 for raising concerns about a potential “capacity trap.” He has since been rehired as the chairman of NTDC. Despite the gathering of experts, there were no clear answers regarding the reasons behind the crash in energy demand. Speculations ranged from the high cost of electricity, deindustrialization, and poor business conditions to the impact of gas-based captive power plants and the increasing use of solar energy and furnace oil-based plants in the industrial sector.

The government hinted at the possibility of introducing special packages to revive the industrial sector, although these would require approval from the International Monetary Fund (IMF), which seems unlikely at this stage. The consensus among the participants was to conduct an expert study based on ground surveys to pinpoint the exact issues before implementing corrective measures to avoid repeating past mistakes.

Rehan Akhtar, the CEO of the Central Power Purchasing Agency (CPPA), informed the hearing that a reduction of 57 paise per unit (approximately Rs7.3 billion against 12.7 billion units) in the Fuel Cost Adjustment (FCA) had been proposed for August. However, considering the existing negative FCA of 37 paise per unit in September bills, the net reduction would only be 20 paise per unit. It is important to note that even this reduction may not benefit consumers, as the negative FCA does not apply to domestic consumers using less than 300 units, agricultural consumers, and others who are already receiving subsidies.

Data revealed that electricity consumption in August was 17.4 percent lower compared to the same month last year and 20.2 percent lower than the targeted sales. An official attributed this drop in demand to the relatively mild weather experienced in August, which was the second wettest and fifth coolest August recorded in the past 64 years.

This situation raises critical questions about the future of energy consumption in Pakistan. As the country grapples with these challenges, it is essential for stakeholders to collaborate and devise effective strategies to not only address the current decline in demand but also to ensure a sustainable energy future. The need for innovative solutions and a comprehensive understanding of the energy landscape has never been more pressing.