PEOPLE need reliable and affordable electricity. While the government has for the most part contained long blackouts — thanks to the addition of new and large generation projects under the multibillion-dollar CPEC initiative in the last few years — it still is struggling to tackle affordability issues. Power tariffs in the country remain stubbornly high, no matter what the government says or does. A media report the other day claimed that power prices in the PTI’s three years of rule so far have surged by a whopping 30pc. The PTI leadership blames the expensive power purchase agreements the previous government had made with the generators for high electricity tariffs, which is true, but only partially.
It is correct that the capacity payments, or fixed costs, paid to the generation companies form the bulk of power tariffs in Pakistan, and that the consistent increases in such payments with the addition of new generation capacities are proving to be a major impediment to ensuring affordable retail electricity prices. At the same time, losses on account of transmission and distribution inefficiencies, as well as widespread power theft, constitute a big part of retail tariffs for households, industry and other consumers. In other words, electricity prices will continue to remain at elevated levels unless the government improves power transmission and distribution. That is not all though. The 50pc increase in generation cost — which is passed on to consumers on a monthly basis — in the last one year owing to surging international coal, gas and oil prices underlines the need to encourage cheaper solar and wind power sources. With baseload energy already ensured, a shift to renewable power in order to reduce retail electricity prices should not be too difficult. Indeed, the incumbent government has recently taken a few initiatives to reform the power sector and slow down the build-up in circular debt. However, it has yet to come up with a holistic plan to restructure the entire power-sector supply chain to ensure affordable electricity to consumers.
Published in Dawn, September 14th, 2021