ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) has stated that underutilization of power plants, combined with excess installed capacity, significantly increased per-unit electricity costs during FY 2024–25, primarily due to higher capacity payments.
The regulator emphasized that a balanced generation mix and improved system efficiency are essential to reduce electricity tariffs.
In its Performance Evaluation Report of Operational Power Plants for FY 2024–25, NEPRA reviewed capacity utilization, generation costs, and operational efficiency under both the CPPA-G and K-Electric (KE) systems.
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According to the report, thermal power plants operated at an overall utilization of 42.5 percent against reference capacity, while renewable energy plants averaged 36.6 percent utilization. This underutilization, alongside surplus capacity, pushed up per-unit electricity costs, largely due to fixed capacity payments.
The total power purchase cost during the fiscal year — excluding electricity imports from Iran — stood at Rs 2,943.214 billion. Of this, 61 percent comprised Capacity Purchase Price (CPP) and 39 percent Energy Purchase Price (EPP).
The average CPP was Rs 14.3 per kWh, while EPP averaged Rs 9.0 per kWh. Elevated CPP reflected surplus capacity and low utilization, whereas EPP was driven up by reliance on expensive imported fuels such as RLNG, RFO, and imported coal.
In contrast, plants based on indigenous fuels — including nuclear, Thar coal, and local gas — offered significantly lower generation costs but remained underutilized.
Among these, Uch Power and Uch-II power plants, operating on dedicated gas fields, recorded generation costs of around Rs 13.4 per kWh.
However, their utilization remained moderate at 80.9 percent and 71.6 percent respectively, despite availability factors exceeding 92 percent.
Ranked among the top in the Economic Merit Order, these plants are considered among the most economical in the national fleet. Their underutilization, however, increased reliance on imported-fuel plants, raising consumer tariffs through monthly fuel adjustments.
Nepra also warned that depletion of the Uch gas field poses future sustainability risks.
Similarly, Thar coal-based plants — another low-cost indigenous source — operated at an average utilization of 72.9 percent during FY 2024–25 despite competitive energy costs. Their limited dispatch led to increased use of costly imported-fuel plants.
The report noted that transition of Lucky Electric Power Company Limited (LEPCL) from imported to Thar coal depends on adequate coal supply and timely completion of the Thar Rail Link Connectivity Project being executed by Pakistan Railways.
While Segment-I of the project is expected to be completed by mid-2026, Segment-II — including the branch line and unloading facility at Port Qasim — remains pending approval of its revised PC-I.
Delays could restrict the transport of 10–12 kilo tons of Thar coal per day, forcing continued reliance on imported coal.
Transmission bottlenecks further constrained dispatch of cheaper southern generation to northern demand centers, increasing reliance on expensive plants. Prolonged outages of the Neelum Jhelum Hydropower Plant and the Guddu 747 MW unit also weakened cost efficiency.
Renewable energy plants faced curtailments due to intermittency and evacuation constraints, resulting in Non-Project Missed Volume payments exceeding Rs 13 billion.
Additionally, fluctuating load and renewable variability increased part-load operations of thermal plants, adding Rs 44.6 billion in partial load adjustment costs during the year. Overall, high fixed costs, low utilization, inefficient dispatch, and system constraints contributed to elevated tariffs and financial stress.
Within the KE system, average utilization remained at 34.6 percent, with continued dependence on imported fuels keeping generation costs significantly higher than the national grid.
Although the interconnection between the National Grid and KE was energized in July 2025 — enabling transfer capacity of up to 2,000 MW — KE’s “Take-or-Pay” RLNG supply agreement for BQPS-III and related part-load charges continue to influence its generation mix and power draw patterns.
Nepra concluded that long-term sustainability requires aligning generation capacity with actual demand, prioritizing indigenous fuels, accelerating transmission upgrades, restoring non-operational low-cost plants, and carefully assessing future capacity additions.
A balanced generation mix and enhanced system efficiency, the regulator stressed, are critical to reducing electricity costs, improving reliability, and ensuring a financially sustainable power sector.
Copyright Business Recorder, 2026
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