Increased inefficiencies in capacity charges criticism emphasized

Rewritten Article:

Electricity Sector Woes: Unveiling the Hidden Costs

It's no secret that Pakistan's energy sector faces a myriad of issues, and a recent analysis by Nepra’s Member (Technical) Rafique Ahmad Shaikh has shed light on some shocking inefficiencies within the transmission system, resulting in exorbitant capacity charges for coal-fired power plants and less relief for consumers in March 2025 under the monthly FCA mechanism.

According to Shaikh, wasteful practices led to hefty payments of Rs 69 billion to three coal-fired power plants despite minimal utilization. This grim situation can be traced back to problems like high generation costs, low operational efficiency, transmission bottlenecks, and outdated dispatch practices.

In his notes, Shaikh addressed three key areas that need urgent attention:

Idle coal plants: Despite generating zero electricity during the quarter, power generators like Guddu Old, TPS Muzaffargarh, and Jamshoro Power Company Limited received significant capacity payments. These plants are plagued by high costs and inefficiency, making it unlikely for them to receive dispatches in the future due to system surplus. Continuing to shell out funds to non-operational units places an undue burden on the power sector and end consumers.
Transmission constraints: Transmission issues are severely restricting the utilization of low-cost, efficient power plants in the southern region, preventing them from operating at full capacity. Examples include Port Qasim, China Power, and Lucky Electric, which reported utilization factors of 1%, 10%, and 0%, respectively, but still claimed Rs 69.09 billion in capacity charges collectively.
Inefficient dispatch practices: Nepra found that terminating certain Power Purchase Agreements (PPAs) and adjustments related to Independent Power Producers (IPPs) helped lower capacity payments, thereby causing a negative adjustment. Improved governance and efficient operations could have led to reduced utility bills and a more substantial decrease in capacity payments.

In conclusion, Shaikh emphasized the necessity of addressing transmission bottlenecks and reforming dispatch practices to optimize the country’s available low-cost power generation resources. The result of ignoring these issues could mean billions of rupees needlessly wasted, burdening the power sector and consumers alike.

Additional Note on FCA Adjustments and Challenges:Shaikh emphasized several persistent issues that continue to drive up electricity prices in Pakistan, despite efforts to reduce costs. Key challenges include:

Electricity sales drop: Due to AT&C-based load shedding and other factors, power generation was 8.5% below the reference level in March 2025. This not only worsens public hardship but also leads to underutilization of 'Take or Pay' power plants, driving up costs.
Ongoing maintenance issues: Outages at key plants like Guddu 747MW Power Plant and Neelum Jhelum 969MW hydropower plant have resulted in significant financial losses. Resolving these issues requires accelerated efforts.
Delayed completion of infrastructure projects: The Lahore North Grid Station remains unfinished, causing underutilization of the HVDC infrastructure and resulting in lost capacity charges. Completing the grid station without delay is essential.
Transmission constraints: These limitations lead to losses in March 2025, negatively impacting the sector's financial viability. Efforts should be made to quickly remove transmission constraints that hinder the power sector's efficiency.
Part Load Adjustment Charges (PLAC): Charges amounted to Rs 2.6 billion in March 2025 and could potentially rise further. A study to reduce PLAC through effective demand-side management is warranted.

In summary, poor governance remains a major stumbling block in streamlining Pakistan's power sector and addressing issues like attainable generation, transmission bottlenecks, and effective dispatch of resources.

Ira highlighted the unnecessary costs paid to three coal-fired power plants totaling Rs 69 billion, despite minimal usage, due to inefficient practices in the electricity sector.
The general news reveals that the transmission system in Pakistan's energy sector is plagued with issues, such as transmission bottlenecks and outdated dispatch practices, causing high costs and exorbitant capacity charges for coal-fired power plants.
In 2025, under the monthly FCA mechanism, consumers can expect less relief, as nefarious practices in the electricity sector have resulted in exorbitant capacity charges.
Inefficiency in the energy sector has led to wasteful payments, as even idle plants like Guddu Old, TPS Muzaffargarh, and Jamshoro Power Company Limited receive capacity payments despite generating zero electricity.
The conclusion of the analysis by Nepra's Member (Technical) suggests the urgent need for reform, particularly in addressing transmission bottlenecks and improving dispatch practices, to optimize the country's available low-cost power generation resources and prevent billions of rupees from being unnecessarily wasted.
Education and self-development should focus on understanding the challenges facing Pakistan's power sector, as key issues include low-cost power plant underutilization due to transmission constraints, ongoing maintenance issues, delayed infrastructure projects, and excessive Part Load Adjustment Charges (PLAC).
The finance industry may experience instability due to the enormous costs and inefficiencies in the energy sector, which creates a heavy burden on both the power sector and end consumers.
In the realm of politics, addressing the corruption and mismanagement in the electricity sector could lead to significant changes in the energy industry, technology, and business sectors, ultimately benefiting the average citizen and enhancing the country's overall development.