It’s the Referee’s call

NEPRA’s State of Industry Report FY24 surprisingly came out within 2024, continuing the trend of identifying bottlenecks in generation, transmission, and distribution while hoping the government will improve its management.Generation capacity utilization remains a major obstacle. The average annual capacity utilization last year was just 33 percent, meaning the benefits of having 46,000 MW of capacity are yet to be realized. Consequently, in 2025, customers in Pakistan are arguably paying an additional 67% for plants that are either not operational or underused.The energy purchase price (EPP) of Rs7/unit is only two-fifths of the capacity payment at Rs17/unit, which largely explains the high energy prices. The issue of capacity utilization is similar in transmission lines, with the Matiari-Lahore High Voltage DC Line being used only 38% of the time, leading to capacity payments totaling Rs98 billion.At the same time, numerous transmission bottlenecks across the grid are also contributing to increased losses. Between FY22 and FY24, estimated losses rose 17-fold, from Rs3.6 billion to Rs60 billion. Additionally, the distribution sector is burdened by an outstanding Rs1,094 billion in dues from chronic defaulters.Aging grid infrastructure, inadequate capacity, and limited investment in transmission upgrades to handle increased capacity are further compromising the sector’s overall reliability.Most of these issues, while long acknowledged, have now reached a critical tipping point, requiring immediate, comprehensive action. Capacity payments remained at the forefront of the debate last year, but any lasting impact on tariffs remains uncertain and will likely become clearer when the annual rebasing process begins.An unfortunate development is that, despite the government’s aggressive nationwide crackdown on electricity theft in 2023, only a meager Rs15 billion in recoveries was reported over the year— a drop in the ocean compared to the overall outstanding dues. 2024 failed to garner support for the presidential ordinance that underpinned the crackdown, though 2025 may present a new opportunity to address this issue.A new headache (and potential opportunity) for policymakers is the rapid rise in solar capacity. Over 156,372 distributed solar systems are now connected to the grid, with 1,181 MW added in FY24—double the amount added the previous year.When electricity prices are as high as they are, and losses continue to plague the sector, customers are increasingly shifting to solar. However, clear long-term policymaking is lacking to provide customers with clarity on buyback rates and give utilities guidance on how to stabilize the grid. The government must take strategic action to determine how much rooftop solar should be integrated alongside utility-scale projects.2025 is a crucial year for the government, with a so-called homegrown economic revival plan just launched to set a future target for the country. The success of this plan hinges on improvements in the power sector, given the intricate interplay between the two.DISCO privatization is also on the table. In the absence of funds to quickly turn around the sector, policies that provide investors with clarity—along with timely regulatory approvals—are essential to set a positive tone for the long term.Economic growth is lagging, as 1QFY25 GDP growth stood at a mere 0.92%, compared to the full-year target of 2.5-3.5%. A similar story is unfolding in the power sector, which is experiencing a consistent decline. The converse is likely to be true as well.Sector-wide challenges require unified reforms led by the government, integrating policies for tariff optimization, renewable energy expansion, and grid modernization. A clear, actionable roadmap is urgently needed, as time for dialogue has passed; the sector requires immediate, actionable reforms for greater energy security and sustainability.The power generators, transmitters, and distributors are all like football players running in different directions. More than a coach, the sector needs the referee—NEPRA—to step up and enforce the rules, moving the match forward.

NEPRA’s State of Industry Report FY24 surprisingly came out within 2024, continuing the trend of identifying bottlenecks in generation, transmission, and distribution while hoping the government will improve its management. Generation capacity utilization remains a major obstacle. The average annual capacity utilization last year was just 33 percent, meaning the benefits of having 46,000 MW of capacity are yet to be realized.

Consequently, in 2025, customers in Pakistan are arguably paying an additional 67% for plants that are either not operational or underused. The energy purchase price (EPP) of Rs7/unit is only two-fifths of the capacity payment at Rs17/unit, which largely explains the high energy prices. The issue of capacity utilization is similar in transmission lines, with the Matiari-Lahore High Voltage DC Line being used only 38% of the time, leading to capacity payments totaling Rs98 billion.

At the same time, numerous transmission bottlenecks across the grid are also contributing to increased losses. Between FY22 and FY24, estimated losses rose 17-fold, from Rs3.6 billion to Rs60 billion.

Additionally, the distribution sector is burdened by an outstanding Rs1,094 billion in dues from chronic defaulters. Aging grid infrastructure, inadequate capacity, and limited investment in transmission upgrades to handle increased capacity are further compromising the sector’s overall reliability. Most of these issues, while long acknowledged, have now reached a critical tipping point, requiring immediate, comprehensive action.

Capacity payments remained at the forefront of the debate last year, but any lasting impact on tariffs remains uncertain and will likely become clearer when the annual rebasing process begins. An unfortunate development is that, despite the government’s aggressive nationwide crackdown on electricity theft in 2023, only a meager Rs15 billion in recoveries was reported over the year— a drop in the ocean compared to the overall outstanding dues. 2024 failed to garner support for the presidential ordinance that underpinned the crackdown, though 2025 may present a new opportunity to address this issue.

A new headache (and potential opportunity) for policymakers is the rapid rise in solar capacity. Over 156,372 distributed solar systems are now connected to the grid, with 1,181 MW added in FY24—double the amount added the previous year. When electricity prices are as high as they are, and losses continue to plague the sector, customers are increasingly shifting to solar.

However, clear long-term policymaking is lacking to provide customers with clarity on buyback rates and give utilities guidance on how to stabilize the grid. The government must take strategic action to determine how much rooftop solar should be integrated alongside utility-scale projects. 2025 is a crucial year for the government, with a so-called homegrown economic revival plan just launched to set a future target for the country.

The success of this plan hinges on improvements in the power sector, given the intricate interplay between the two. DISCO privatization is also on the table. In the absence of funds to quickly turn around the sector, policies that provide investors with clarity—along with timely regulatory approvals—are essential to set a positive tone for the long term.

Economic growth is lagging, as 1QFY25 GDP growth stood at a mere 0.92%, compared to the full-year target of 2.5-3.

5%. A similar story is unfolding in the power sector, which is experiencing a consistent decline. The converse is likely to be true as well.

Sector-wide challenges require unified reforms led by the government, integrating policies for tariff optimization, renewable energy expansion, and grid modernization. A clear, actionable roadmap is urgently needed, as time for dialogue has passed; the sector requires immediate, actionable reforms for greater energy security and sustainability. The power generators, transmitters, and distributors are all like football players running in different directions.

More than a coach, the sector needs the referee—NEPRA—to step up and enforce the rules, moving the match forward..