In a move offering substantial relief to electricity consumers and businesses, the National Electric Power Regulatory Authority (Nepra) has lowered the base power tariff by Rs1.49 per unit for the fiscal year 2025-26. This brings the tariff down to Rs34.01/unit, representing a 4.2% cut from the current rate of Rs35.50/unit.
This downward revision is attributed to reduced capacity payments secured through new government agreements with Independent Power Producers (IPPs), declining energy prices, and a projected 2.8% increase in demand. Nepra has now submitted its rebasing decision to the federal government for final approval and the implementation of a uniform tariff nationwide.
For FY26, the regulator has approved a total revenue requirement of Rs3.52 trillion for ex-Wapda distribution companies (XWDiscos). This figure comprises Rs3.07 trillion for power purchase price (PPP) and Rs454 billion for distribution margins and system losses.
It’s noteworthy that the government had previously increased the base tariff by Rs5.72 per unit (19.2%) to Rs35.50/unit in FY25, making the current reduction a welcome respite for both businesses and households. Nepra credits the easing prices to improved macroeconomic indicators and a noticeable return of captive industrial users to the national grid.
However, challenges persist. Imported coal plants are anticipated to operate at only 24% capacity in FY26, yet they are projected to incur a steep cost of Rs61.43/unit due to high dollar-based returns on equity (27.45%). Concurrently, a surplus of re-gasified LNG (RLNG), stemming from the industrial shift, has reached 450 MMCFD, leading to a diversion cost of Rs300 billion as it is redirected for residential use.
Of the total PPP, Rs1.94 trillion—over 63%—is allocated for capacity charges, while Rs1.13 trillion covers fuel and variable O&M costs. These capacity charges alone translate to Rs6,484 per unit per month, based on an average projected monthly demand of 24,943 MW.
The average PPP per unit for XWDiscos, before transmission and distribution (T&D) loss adjustments, is estimated at Rs26.34/unit. This includes Rs16.67/unit in capacity charges and Rs9.67/unit in energy costs. Including K-Electric’s share, the national average PPP stands at Rs25.98/unit, with the cost passed on to Discos under the prescribed mechanism.
Data indicates that this surplus has curtailed production from key domestic gas fields, increasing reliance on crude oil imports. Compounding the issue, hydropower generation is expected to drop 18% year-on-year due to reduced water flows, further shifting the generation mix towards more expensive thermal sources.
While a 900MW south-to-north transmission line, slated for completion by August 2025, could alleviate some bottlenecks, fundamental structural reforms remain critical to achieving sustainable gains in the power sector.
