Power Sector Capacity Payments Soar by 892% Over the Last Decade
ISLAMABAD, July 22 — Pakistan’s Public Accounts Committee (PAC) has revealed a staggering 892% increase in capacity payments within the power sector — from Rs. 141 billion in 2015 to a whopping Rs. 1,400 billion in 2024.
The sharp rise, according to officials, is mainly attributed to the addition of new LNG and coal-fired power plants, many of which rely heavily on imported fuels.
🔍 What Are Capacity Payments?
Capacity payments are fixed costs paid to power producers, whether or not the electricity is actually used. These are designed to ensure that enough generation capacity is always available to meet demand. However, the skyrocketing figures have raised concerns over the sustainability of this model.
📊 Key Factors Behind the Surge
During a PAC meeting that reviewed audit objections for the Power Division (FY 2023–24), representatives from the Central Power Purchasing Agency (CPPA) identified several reasons for the dramatic cost escalation:
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Increased dependency on imported coal
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Rising global fuel prices
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Significant depreciation of the Pakistani rupee
The CPPA officials acknowledged that the country’s growing reliance on imported fuels, especially for coal-fired generation, has made electricity production far more expensive.
🗣️ Committee Concerns
PAC member Syed Naveed Qamar questioned whether the Power Division was directly blaming coal for the high cost of electricity. In response, CPPA representatives reiterated that imported coal plays a major role in inflating power generation costs.
This statement follows recent findings that power companies overbilled consumers by Rs. 244 billion, reportedly to mask line losses and inefficiencies.
⚡ The Bigger Picture
With electricity tariffs continuing to rise for consumers, the revelations highlight the urgent need for a reassessment of energy procurement strategies. The government has been under increasing pressure to promote domestic energy sources and improve efficiency in the power distribution network.
