ISLAMABAD: Power sector entities remain uncertain about the financial and operational impact of the ongoing Middle East conflict over the coming months, while industry representatives have warned that they may opt to shut down operations rather than pay a high Fuel Charges Adjustment (FCA) of Rs10 per unit.
This concern was highlighted during a public hearing held by National Electric Power Regulatory Authority (NEPRA) on the FCA for February 2026.
The Central Power Purchasing Agency-Guaranteed (CPPA-G) has sought a positive adjustment of Rs1.64 per unit for February, to be reflected in March bills and recovered in April 2026. This would replace the Rs1.63 per unit FCA for January, which was recovered in March, implying only a marginal net impact.
During the hearing, industry representatives including Aamir Sheikh, Rehan Javed, Arif Bilwani, and Tanveer Barry raised questions regarding pricing mechanisms, the potential impact of the Middle East conflict on energy costs, the non-availability of the combined-cycle Guddu plant, closure of Neelum-Jhelum, and the growing circular debt.
Chief Executive Officer of CPPA-G, Rihan Javed, informed the regulator that fuel prices in February remained relatively low, including RLNG and imported coal. He added that the upcoming Quarterly Tariff Adjustment (QTA) is expected to be negative by Rs2.79 per unit.
“There is no significant variation in fuel prices for February and even March despite regional tensions, but the impact may be felt in the coming months,” he said.
Responding to queries, he noted that while the region is facing a war-like situation and RLNG supplies are already under force majeure at lower prices, imported coal supplies remain unaffected as they originate from South Africa and Indonesia.
On circular debt, he said that financing has not yet been fully disbursed due to certain conditions. “Once the entire amount raised from banks is released, the circular debt stock will decline,” he added.
He further clarified that the Debt Service Surcharge (DSS) of Rs3.23 per unit, aimed at retiring circular debt, will not extend beyond the estimated recovery period.
Tanveer Barry, representing KCCI, argued that the FCA could have been negative by 36 paisa had the reference tariff not been revised from Rs8.74 to Rs6.73 per unit, which resulted in a positive adjustment of Rs1.64.
He cited data from PPMC, that circular debt increased from Rs1.689 trillion to Rs1.9 trillion during July–December 2025-26. He added that the government has borrowed Rs1.275 trillion to manage the debt, while consumers are paying Rs3.23 per unit as DSS over the next five years.
“If circular debt is not reduced, future generations will continue to bear this burden,” he warned, adding that potential disruptions in gas, RLNG, and coal supplies due to the conflict could raise the risk of load shedding, even in industrial and previously exempted areas.
However, Chief Financial Officer of PPMC, Naveed Qaiser, said any decision regarding load shedding in the current situation would be taken in consultation with stakeholders. He noted that the industry has already been given relief of around Rs19 per unit, including taxes, with the current tariff standing at 12.43 cents per unit.
He explained that April bills will reflect the FCA for February, while March figures are also expected to remain stable, as only 25 percent of power generation relies on imported fuels linked to Brent crude.
He emphasised that both the government and the regulator are working to shield consumers from the impact of global conflicts.
“Our tariff benchmark was based on USD70 per barrel, which has now risen to USD113, but due to an 11 percent increase in generation, there has been no major spike in electricity prices,” he said.
Qaiser observed that energy prices in May 2026 would likely remain similar to recent months due to the government’s incremental package and close monitoring of the situation.
“All categories of consumers, including industry, can be reassured that there will not be any significant increase in tariffs,” he added.
He further stated that the circular debt stock stood at Rs1.77 trillion as of January 2026, while February figures are yet to be reconciled with the regulator. He acknowledged that seasonal factors and delays in subsidy payments are the main drivers of the increase, adding that the fiscal year is expected to close at Rs1.614 trillion.
Industry representatives reiterated concerns that despite assurances, tariffs effectively increased after rebasing from January 1, 2026, due to changes in reference values. They noted that the February reference value was revised by Rs2 per unit (Rs8.735 vs Rs6.73), ensuring a higher FCA regardless of actual generation.
They also sought clarity on the FCA from April 1, 2026, as it is critical for business planning. Additionally, NEPRA was urged to resolve issues with Pakistan Railways to ensure uninterrupted coal supply to the 1,500MW Sahiwal coal-fired power plant.
Aamir Sheikh proposed aligning the FCA mechanism with the QTA framework, suggesting that both adjustments should be applied simultaneously instead of with a lag of two to three months. This, he argued, would help industry better forecast costs and pricing.
He further suggested that both FCA and QTA for a given month should be charged on future consumption, enabling exporters to plan and price their goods more effectively.
NEPRA Member (Tariff & Finance), Amina Ahmed, said there is currently no direct impact of the conflict on energy prices. However, she added that the Independent System and Market Operator (ISMO) has been tasked with providing forward estimates, particularly regarding RLNG availability.
“We are assessing future fuel scenarios, including possible supply shortfalls and alternative fuels. While we cannot share details at this stage, industry will be informed in due course,” she said.
Rehan Javed of FPCCI stated that industry has contributed an additional Rs590 billion to the government and called for a review of the tariff mechanism to benefit consumers who have increased their electricity usage.
Officials further revealed that captive power plants consumed 607 million units in February 2026—an 81 percent increase compared to 335 million units in February 2025.
It was further noted that industrial electricity consumption rose by 43 percent under the incremental package, while agricultural consumption increased by 35 percent.
Arif Bilwani raised concerns regarding curtailment of wind power, the combined-cycle 747MW Guddu power plant, the closure of the 969MW Neelum-Jhelum Hydropower Project, and future generation from RLNG-fired plants. Officials from the Power Division and NEPRA did not respond to his queries, prompting him to question whom he should approach for answers.
Copyright Business Recorder, 2026
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