ISLAMABAD : The Indicative Generation Capacity Expansion Plan (IGCEP) is a critical plan developed under the grid code, outlining Pakistan’s future power generation needs. Despite the requirement for annual submission to NEPRA, the plan has been delayed by nearly two years and calls for inquiry and accountability. This delay has sparked intense debates in policy circles, focusing on adjusting public sector projects, such as WAPDA’s hydel projects or PAEC’s nuclear projects. Unfortunately, this situation raises concerns about manipulation, prioritizing entities profits over pauper peoples, and burdening the nation with not required and expensive projects.
The current approach may lead to a capacity surplus trap, harming Pakistan’s industrial sector, economy, and potentially causing default due to ill-informed power sector decisions. To avoid this, adopting a consumer-centric approach in the IGCEP 2024-34 is crucial, prioritizing DISCOs and consumers needs in power plant procurement and network expansion and installation. The time to act is now. If not, future generations will bear the consequences. Policy makers and regulators must rethink their approach, acting wisely to provide relief to consumers and the economy.
It’s fact to reiterate that Pakistan’s power sector is at a critical juncture, with the IGCEP steering the country towards a potentially catastrophic future. Despite the annually decreasing energy sales of distribution companies by 2.4%, the IGCEP plan persists in adding new generation capacity, expanding the network, and increasing investments. This approach will inevitably lead to a surge in consumer tariffs, contradicting the government’s continued efforts to reduce them.
The numbers are alarming. With annual sales of 106 billion units and revenue recovery of Rs 3800 billions, the average tariff costs Rs. 37 per unit . However, with year on year reduced sales and increased investments in network expansion and rehabilitation, totaling Rs. 1200-1500 billion over the next 5-7 years , the sector revenue requirement would substantially be increased in reduced sales growth scenario and tariff is expected to rise to Rs. 47- 53 per unit over the next decade with additional taxes and surges added to top of it.
” This is in stark contrast to the regional tariff of 9 Cents versus the crippling tariff of 15 Cents charges in Pakistan, highlighting the need and urgency to reduce tariffs by 4-5 Cents especially for the industrial and commercial segment of consumers for much needed economic growth of the country,” said one of the key power sector experts.
The IGCEP plan’s focus on peak demand growth of 3.1% and energy growth of 2.4% is misguided, given the declining peak and energy sales. The addition of new generation capacity and network expansion will only serve to increase the financial burden on consumers. It is imperative that policy makers and regulators reassess the IGCEP plan and adjust their approach to prioritize reducing tariffs and addressing the root causes of declining energy sales. A call to action is to avoid a death spiral of perpetually increasing tariffs, it is crucial to: (i). stop adding new generation capacity, even for committed or least-cost project (ii)limit network expansion to removing bottlenecks, rather than pursuing growth projects (iii) revalidate and adjust the planning cycle to prioritize reducing tariffs and addressing declining energy sales.
By taking a conscious and proactive approach, Pakistan can avoid the pitfalls of the IGCEP plan and create a more sustainable and equitable power sector for its citizens. Ends
