ISLAMABAD: The Central Power Purchasing Agency-Guaranteed (CPPA-G) has sought an approximately 8 percent increase in the average Power Purchase Price (PPP) for distribution companies (Discos) to Rs27.309 per kilowatt-hour (kWh) for calendar year 2027, compared with Rs25.320 per unit approved for CY2026, under its base-case scenario assuming 2.6 percent demand growth and no load management.
The projection indicates further pressure on electricity tariffs, as capacity payments, fuel costs and transmission-related expenses continue to weigh heavily on the power sector, despite efforts to reduce generation costs and renegotiate agreements with independent power producers (IPPs).
The National Electric Power Regulatory Authority (Nepra) on Tuesday held a public hearing to examine CPPA-G’s projected power purchase price report, which will form the basis of rebasing consumer-end electricity tariffs effective January 1, 2027.
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Chairman Nepra Waseem Mukhtar sought clarifications regarding projections of RLNG supplies, rupee-dollar parity, Brent crude prices and discrepancies in electricity demand projections submitted by CPPA-G, the Independent System and Market Operator (ISMO) and distribution companies.
A CPPA-G team led by its Chief Executive Officer, Rihan Akhtar, presented six scenarios for projecting the power purchase price for CY2027, acknowledging considerable uncertainties concerning international fuel prices, fuel availability, exchange-rate movements and the possibility of higher fuel charges adjustments (FCAs).
Under the base-case scenario, total power purchase cost has been projected at Rs3.552 trillion against electricity sales of 130,081 gigawatt-hours (GWh) to Discos during CY2027, translating into an average PPP of Rs27.309 per unit.
The ideal-case scenario envisages a PPP of Rs25.883 per kWh, with total power purchase cost estimated at Rs3.367 trillion. However, the two worst-case scenarios project the price at Rs28.835 and Rs29.255 per kWh, respectively, reflecting higher fuel costs, variable operation and maintenance expenses and capacity charges.
The demand-sensitivity scenario estimates the PPP at Rs27.568 per kWh, while a scenario based on a different RLNG and indigenous gas mix projects Rs26.441 per unit.
According to Rihan Akhtar, the agency has categorised uncertainties into low, moderate and high levels. High uncertainties include global oil-price movements affecting RLNG and residual fuel oil (RFO), oil-linked LNG contracts, spot-market prices, gas availability and fluctuations in furnace-oil prices.
Moderate uncertainties include international coal prices, freight charges, exchange-rate movements and domestic interest rates affecting financing costs incorporated into capacity payments.
Low uncertainties include exchange-rate movements affecting imported fuels and foreign-currency-linked capacity payments, electricity demand growth, local inflation, domestic coal prices and hydrological conditions influencing hydel generation.
The six scenarios have been developed using assumptions relating to electricity demand, exchange rates, US inflation, the Karachi Interbank Offered Rate (KIBOR), Secured Overnight Financing Rate (SOFR), domestic inflation, transmission charges, market operator fees and losses in the National Grid Company (NGC) system.
Under the base case, CPPA-G has assumed demand growth of 2.60 percent, an exchange rate of Rs279 per dollar, US inflation of 2.10 percent, KIBOR of 11.70 percent, SOFR of 3.98 percent and domestic inflation of 8.20 percent.
The exchange-rate assumption rises to Rs290 per dollar under both worst-case scenarios, while the demand-sensitivity scenario assumes growth of only 0.70 percent.
Nepra directed CPPA-G to revise its assumed KIBOR rate to 12 percent from 11.70 percent, which could further affect the projected cost of electricity.
Under the base case, fuel costs have been estimated at Rs1.319 trillion, equivalent to Rs10.141 per unit, while variable operation and maintenance expenses are projected at Rs70.575 billion, or Re0.543 per kWh.
Capacity charges constitute the largest component, estimated at Rs1.914 trillion, equivalent to Rs14.717 per unit. Transmission and market-related charges have been projected at Rs248.3 billion, or Rs1.909 per kWh.
Under the ideal-case scenario, fuel costs decline to Rs1.134 trillion or Rs8.714 per unit, while capacity charges remain at Rs1.914 trillion. The resulting PPP stands at Rs25.883 per kWh.
Worst-case scenario-I envisages fuel costs of Rs1.469 trillion and capacity charges of Rs1.962 trillion, pushing the PPP to Rs28.835 per unit. Under worst-case scenario-II, fuel costs increase further to Rs1.524 trillion, with capacity charges remaining at Rs1.962 trillion, taking the price to Rs29.255 per kWh.
Rihan Akhtar stated that global crude oil prices remained uncertain and that all fuels, including LNG, were linked to international petroleum prices.
“Electricity purchase price estimates have been formulated based on oil, LNG prices and water availability,” he said.
Responding to a question, he explained that CY2027 demand projections had been prepared on the assumption of zero load-shedding, although the government could introduce load management if required.
Naveed Qaiser, Chief Financial Officer of Power Planning and Monitoring Company (PPMC), said electricity demand had been met during the previous year and that new assumptions had been incorporated into CY2027 projections. He supported continuation of the incremental electricity package for industrial consumers.
Industrial representatives, however, strongly opposed continuation of the incremental package, arguing that it benefited only a limited number of industries while increasing the burden on other consumers through cross-subsidies.
Aamir Sheikh demanded immediate suspension of the incremental package, stating that it had failed to produce any significant improvement in electricity demand and had increased costs for more than 90 percent of consumers who did not receive its benefit.
He also called for prospective application of fuel charges adjustments from January 1, 2027, when the rebased tariff becomes effective, arguing that industries needed advance certainty regarding electricity costs.
He warned that the Power Division had indicated FCAs could increase two to three times during winter, making it difficult for industries to plan production and exports.
Sheikh further demanded removal of levies on furnace oil and diesel used for electricity generation, maximum allocation of indigenous gas to power plants and urgent removal of South-North transmission constraints.
He questioned why non-fuel expenses were increasing despite the rupee strengthening from around Rs290 to Rs279 against the dollar, and urged Nepra to scrutinise the approximately 12 percent non-fuel component of electricity costs.
Tanveer Barry, another Karachi-based industry representative, observed that the projected PPP scenarios ranging from Rs25.883 to Rs29.255 per unit indicated an increase in electricity costs during CY2027.
He questioned why capacity charges remained exceptionally high despite previous assurances that negotiations with IPPs would substantially reduce them.
Barry also sought details of additional power plants expected to enter the system during CY2027 and their impact on capacity payments.
He advocated greater reliance on Thar coal, nuclear power, wind and indigenous gas instead of expensive imported fuels, including RLNG, and urged DISCOs to control administrative expenses, improve recoveries, stop unnecessary hiring and contain circular debt.
Rehan Javed stressed that the average consumer-end electricity tariff of Rs33.38 per unit during CY2026 must come down rather than increase further.
He argued that the power purchase price alone was insufficient to assess the actual burden on consumers, as additional distribution and other charges ultimately pushed the consumer-end tariff considerably higher.
He submitted detailed objections seeking explanations from CPPA-G, ISMO, NGC, the Petroleum Division and DISCOs regarding demand forecasts, fuel assumptions, transmission constraints, merit-order violations and capacity payments.
He particularly questioned the assumption of 200 million cubic feet per day of indigenous gas in the RLNG and gas-mix scenario, asking what would happen if the projected supplies failed to materialise and who would bear the additional cost.
The industrial representative also demanded detailed disclosure of South-North electricity transfer constraints, actual transmission utilisation against projected capacity of 3,200 to 4,800 MW and the annual financial cost of transmission bottlenecks, reportedly exceeding Rs400 billion.
He sought an hourly explanation of deviations from the merit order, including the quantities of electricity generated from expensive fuels despite availability of cheaper alternatives.
The industry also urged the regulator to examine overlapping functions of CPPA-G, NGC, ISMO, PPIB, WAPDA and Discos, proposing rationalisation of the power-sector structure, reduction in staffing and salary expenses and a comprehensive three-year cost-cutting plan.
The representatives requested Nepra to ensure that the CY2027 consumer-end tariff remained below Rs33.38 per unit, record its findings on the objections in the determination and require NGC to present detailed transmission data.
They further demanded at least seven days’ advance notice of the consumer-end tariff hearing, arguing that short notice in previous years had deprived consumers of sufficient time to scrutinise the figures.
Arif Bilvani, another intervener, sought clarification regarding the proposed increase in electricity supply to K-Electric from the national grid.
Copyright Business Recorder, 2026