SDPI Launches Booklet to Clarify Pakistan's Electric Power Tariff Structure

The electric power system in Pakistan has long been a source of confusion and frustration for many consumers. With a complex tariff structure and frequent changes in energy policies, understanding how electricity pricing works can feel like trying to solve a puzzle with missing pieces. In an effort to clarify these issues, the Sustainable Development Policy Institute (SDPI) recently launched a booklet titled "Understanding Electric Power System and Tariff Structure in Pakistan: A Basic Guide." This initiative aims to debunk common myths and provide clear explanations about the electric power system and its tariff structure.

During a recent webinar, experts highlighted the importance of simplifying the existing electric power system to alleviate the burden on domestic consumers. Zainab Babar, a Research Associate at SDPI, moderated the session and pointed out that the recent changes in tariffs and energy policies have caused unrest among both consumers and policymakers. She emphasized that the new booklet is designed to address these concerns and provide answers to common questions in an easily understandable manner.

Engineer Ahad Nazir, an Associate Research Fellow at SDPI, explained that the power sector in Pakistan is highly technical and complex. He noted that even experts in the field often struggle to grasp the intricacies of the system. The booklet aims to break down the value chain of electricity—from generation to transmission and distribution—making it easier for consumers to understand how tariffs are determined. He mentioned that many consumers frequently ask about fuel price adjustments and quarterly tariff adjustments, and the booklet provides insights into these topics.

One of the key points raised during the webinar was the need for consumers to be aware of the myths surrounding the power sector, particularly regarding exchange rates, fuel prices, and generation efficiency. Engineer Nazir clarified that the National Electric Power Regulatory Authority (NEPRA) is responsible for setting tariffs, and other organizations, such as GENCOs and DISCOs, do not have the authority to unilaterally decide on power tariffs. The SDPI's booklet aims to dispel these myths and educate the public about the realities of the power sector.

Dr. Khalid Waleed, a Research Fellow at SDPI, emphasized the significance of price signals in developing countries. He explained that these signals are crucial for driving demand and supply in the power sector, which in turn influences policy decisions. Dr. Waleed highlighted that a large portion of electricity consumption in Pakistan comes from the residential sector, which accounts for about 48% of total electricity usage. In contrast, industrial consumers, who make up only 1% of total consumers, account for 25% of electricity consumption.

To address the challenges faced by the power sector, experts suggested several innovative solutions, including targeted subsidies, simplified tariff mechanisms, and energy-efficient practices. Afia Malik, a Senior Research Economist at the Pakistan Institute of Development Economics (PIDE), pointed out that many consumers struggle to manage their electricity bills due to a lack of understanding of how tariffs are formulated. She stressed the need for a revised tariff design that focuses on innovative approaches to break the cycle of excessive consumption in non-productive sectors.

Industry representatives also voiced their concerns about tariff uncertainty. Abubakar Ismail, Head of Energy & Sustainability at Amreli Steels Limited, noted that the industry faces numerous challenges due to unpredictable tariffs. He called for a more prospective approach to tariff design that is easier for the general public to comprehend. Ahtasam Ahmad, an Energy Finance Associate at Renewables First, echoed this sentiment, stating that simplifying the tariff structure is essential to reduce uncertainty and volatility.

Asad Mahmood, an Energy Efficiency and Renewable Energy Expert, praised the SDPI's efforts in launching the booklet and emphasized the importance of ongoing discussions about the power sector. He highlighted that while uncertainty exists, effective communication tools are vital for helping consumers understand their electricity consumption patterns and take control of their usage.

The launch of the SDPI's booklet represents a significant step towards demystifying the electric power system and tariff structure in Pakistan. By providing clear and accessible information, the SDPI aims to empower consumers with the knowledge they need to navigate the complexities of the power sector. As the country continues to grapple with energy challenges, initiatives like this are crucial for fostering a better understanding of electricity pricing and ultimately improving the overall energy landscape in Pakistan.