Massive Increase Expected in Electricity Unit Prices Soon - Bloom Pakistan

Massive Increase Expected in Electricity Unit Prices Soon

The federal government has approved elecricity unit prices increase for FY26 by Rs. 3.23 per unit to support a Rs. 1.25 trillion debt refinancing scheme designed to reduce circular debt. As per a report by AKD Securities, this surcharge will manage both principal and interest payments, taking the place of the surcharge that only covered interest costs.

This new debt structure will replace expensive loans such as PHPL borrowings (KIBOR+2%) and dues to IPPs (up to KIBOR+4%) with lower-cost financing at KIBOR–0.9%, potentially saving around Rs. 200 billion per year.

Allocation of funds:

Rs. 683 billion for settling PHPL liabilities
Rs. 280 billion allocated for nuclear power projects
Rs. 220 billion assigned to RLNG-based IPPs
Rs. 720 billion through revised IPP terms and hydel waivers

The FY26 federal budget has also earmarked Rs. 250 billion to back the initiative.

Separately, NEPRA has reduced the average base tariff by Rs. 1.50/kWh for FY26, setting it at Rs. 34.0/kWh—4 percent lower than Rs. 35.5/kWh in FY25.

This reduction is due to a Rs. 212 billion decline in the Power Purchase Price (PPP), including:

Rs. 186 billion cut in capacity payments (Rs. 1.34/kWh)
Rs. 36 billion reduction in energy costs (Rs. 0.07/kWh)

The sanctioned revenue requirement is now Rs. 3.52 trillion, showing a decrease of Rs. 247 billion from the previous year. NEPRA has also factored in Rs. 58.7 billion (Rs. 0.38/kWh) under prior year modifications. To uphold consistent tariffs across DISCOs and K-Electric, the government will extend a Rs. 249 billion subsidy.

Structural measures such as early IPP payoffs, tariff re-negotiations, and higher industrial captive gas rates (Rs. 41.9/kWh compared to grid rate of Rs. 32.6/kWh) are projected to increase grid usage and lower expenses. AKD anticipates tariffs will remain steady in the mid-term, bolstered by rising demand, captive-to-grid shifts, reduced capacity charges, and anti-theft initiatives.