ISLAMABAD: Dr. Fiaz Ahmad Chaudhry, Chairman of the National Transmission and Despatch Company (NTDC) Board, has stated that the financial burden of non-performing DISCOs should not be shifted to the industry, as the recovery of about 70% of the load in the country is above 98%.
Speaking during a discussion on the current crisis in the power sector, he emphasized that high electricity prices are not solely due to heavy reliance on imported fuel. “Our current fuel mix is not expensive at all; the high cost is mainly due to idle capacity of the imported fuel-based power plants,” he said. He added that the power system operating cost accounts for less than 30% of the total electricity tariff, and over 60% of energy production is from green sources. The fuel cost component of total energy production is about Rs 9 per kWh. However, the idle or surplus capacity in base-load generation (less than 10% utilization), such as imported coal-based power plants and some old furnace oil-based power plants, leads to high capacity payments, also known as the “capacity trap,” which costs around Rs 20 per kWh.
The total T&D (Transmission and Distribution) development and O&M (Operation and Maintenance) costs for NTDC and DISCOs amount to approximately Rs 6 per kWh. Therefore, the cost of service for delivering electricity to consumers’ premises is about Rs 35 per kWh. For example, increased solarization could reduce the fuel cost component from Rs 9 per kWh to Rs 8 per kWh, as some RLNG-based or furnace oil-based plants would still need to be operated for load following and peaking duty, especially those located near load centers.
He further stated that the National Grid has the capacity and capability to meet peak demand of more than 27,000 MW, as demonstrated by supplying 25,516 MW in August 2023. Therefore, there are no capacity constraints for industrial demand. T&D capacity and capability have increased since then. However, there is a need to improve supply reliability for industrial demand, which currently ranges between 5,000 MW and 7,000 MW.
“All industrial hubs should be supplied from multiple sources with enhanced asset management practices. These improvements are easily achievable with increased focus on industrialization and technology adoption,” he added.Chairman Dr. Fiaz also emphasized that the financial burden of non-performing DISCOs should not be passed on to the industry, as recovery of around 70% of the load in the country is above 98%. He further stated, “We should improve the paying capacity of our people and enhance the law and order situation in areas where recovery is a challenge. Governance improvements in struggling DISCOs will yield minimal financial results.”
He expressed support for energy efficiency and demand-side management measures, especially for domestic and commercial consumers, and stressed the importance of the government implementing the Energy Conservation Building Code (ECBC) 2023 as soon as possible. “This will reduce system peak demand and free up saved energy for industrial use,” he added.
Dr. Fiaz also suggested that industries should pay their share of subsidies—if any—only after their products are sold, meaning from their revenues rather than as part of their production costs. He highlighted that the country has a robust Integrated Power System Planning process, which needs to be followed.
Another power sector expert, noted that the EPP (Energy Policy and Planning) part is regionally the best and sustainable. He acknowledged that the capacity trap is a significant issue and suggested the solution lies in increasing demand and incentivizing a flat tariff for industry, along with exploring new load opportunities such as smelters, data centers, and data mining. These opportunities have 95+ load factors. He also had a different perspective on the T&D segment, stating that it costs about Rs 8 per kWh for each unit delivered to consumers, with increasing costs due to new assets being built and reduced sales from generation. The average tariff charged is Rs 38 per kWh, with PPP costs of Rs 30 (Rs 22 for CCP + Rs 10 for EPP).
“There are serious issues and inefficiencies in the T&D segment as well. The total asset base of DISCOs and NTDC is worth around Rs 800 billion, and their charges are equal to the amount spent on O&M, returns, and depreciation,” he said, adding that rationalization is needed. For example, the country pays approximately Rs 100 billion for thousands of kilometers of NTDC’s HVAC network, whereas a single HVDC project with a few hundred kilometers, operated at half capacity, costs similar amounts in AC system-level charges to consumers. There is a need to optimize the use of T&D assets and rationalize O&M costs through efficient and optimal investments under a corporatized and privatized institutional structure, ensuring competitive procurements, best project management strategies, and governance models. The constraints caused by the networks have also contributed to higher consumer tariffs.
Another expert, Irfan Ahmad, stated that the current energy mix and tariff structure must change to meet near-future requirements. He pointed out that the 70% capacity charges for DISCOs are due to a vanishing industry caused by import-oriented policies, which have also affected locally manufactured equipment. Over 60% of the installed capacity is green, but it contributes to only 30% of energy production due to plant factors. Electricity from hydro projects is seasonal and dependent on agricultural requirements.
The national grid’s firm capacity of about 25 GW is relatively low. However, with the upcoming distributed generation to be utilized locally, the country can manage for the time being. The country cannot, however, sustain 5,000 MW of industrial demand, which should be around 30,000 MW for a GDP growth rate of over 5% in a country with a population of 250 million.
DISCOs’ reported recovery and loss figures are often inaccurate, with some operators hiding billed units in disconnected meters to show reduced losses. Rooftop PV solar, whether metered or non-metered, is a viable solution if the equipment is locally manufactured. The implementation of ECBC 2023 will take two generations to fully realize.
“If production costs are high, revenues will suffer,” said Irfan Ahmad. “Industries will defect from the grid or move elsewhere if nothing is done soon.” He concluded that while planning may be good, implementation has been lacking. NTDC’s network cannot cope with the intermittent renewable energy planned 15 years ago. Wind power plants (WPPs) are being severely curtailed due to network issues, and network trippings are frequent. In 2024, Rs 40 billion was paid as NPMV (Non-Payment of Market Value), which is a national loss and a huge burden on the people of Pakistan. NTDC needs to take action to prevent such losses. Furthermore, NTDC’s specifications need to be revised to support local production of electrical equipment.
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