Electricity generation in April 2023 went down 23 percent year-on-year. April of 2018 saw higher electricity generation than April of 2023. This is how worrisome the slide is – by far the steepest fall recorded in power generation in at least 15 years. The previous low was during the peak Covid three years ago at 14 percent. The year-to-date power generation at 100 billion units is down 10 percent year-on-year. Short of a miracle in May and June – Pakistan’s fiscal year power generation is all set to record negative growth year-on-year – a rarity by any stretch.

Some context here would help. Cooler temperatures last month surely played a role, especially keeping peak load demand in check from the household segment. Recall that April 2022 was the hottest month recorded in over 60 years, with mean temperatures recorded at 28 degree Celsius – 12 percent warmer than April 2023. It is almost certain the demand from industrial sector went down considerably – given how fast the LSM growth has tanked (down 25% for 9MFY23). Significant increase in consumer end tariffs will take more toll on demand, as more surcharges and adjustments come to the fore.

In terms of the mix, RLNG based generation led the way with a quarter shares. Interestingly, RLNG also had the highest average fuel cost for all fuel types at Rs23.83/unit. Economic merit order violations have been few of late, but a massive drop in contribution form hydel sources and less than optimal generation from nuclear sources meant there was more pressure on thermal generation. With natural gas depleting and Thar coal plants operating near capacity – the onus fell on RLNG based plants.

None of the Gencos had any business operating the RLNG plants given exorbitant reference fuel costs and the resultant position in the merit order. The lowest fuel cost for RLNG was Rs22/unit, and with imported coal much costlier due to significant currency adjustment and commodity price, most imported coal plants sat very low in the order of dispatch.

The strain on imported fuel for power generation is not likely to go away anytime soon, given Neelum Jhelum hydropower plant is not slated to be back before July 2023. Coal and furnace oil will remain costly; the contribution from solar, wind and bagasse has not shown much improvement either. Consumers are in for a rude shock once they receive bills for first summer months – and that could drastically reduce demand from households, as the increase in bills is lot more than what official inflation publication shows. Industrial slowdown may not have bottomed yet.

The demand will remain under pressure, much to the authorities’ pleasure as they would not have to run pillar to post ensuring sufficient fuel availability at all costs. That said expect higher frequency of peak load demand fluctuations, for which the system will have to be ready, in order to avoid nationwide blackouts. The fuel adjustment is likely to stay on the higher side, despite base revisions earlier.