Measly tariff reductions offer little relief as Pakistan turns to solar power

Consumers of ex-Wapda power distribution companies and K-electric are to benefit from a reduced electricity tariff of up to 75 paisa per unit. According to Express Tribune, the power sector regulator reduced tariffs by up to 0.7556 rupees per unit for power distributors because of the fluctuations in fuel charges experienced in late 2024.

In October 2024, the cut in power price for K-Electric consumers stood at just under 0.5 rupees per kilowatt hour. The tariff reduction will be adjusted in electricity bills for January 2025, giving consumers some relief. Owing to the size of the reimbursement, the effects will be more pronounced for consumers who utilise more electricity on average.

While addressing concerns regarding the application of tariffs by power distributors, the regulator stated that the National Transmission and Despatch Company (NTDC) reported losses from transformation and transmission that add up to approximately three percent of the energy produced.

This loss translates to about 244 gigawatt hours (GWH). While transmission losses are to be expected over long distances, they still negatively impact the profit margins of power distributors.

However, power distributors do not produce all of their electricity themselves, which is beneficial in reducing transmission losses. This is because electricity produced closer to a specific region can supply this region first, reducing the need for more electricity to be transmitted over larger distances.

The two key agents aiding power distributors are the vast array of net metering unit owners and independent power producers. According to data released by the power producers, net metering units provided a staggering 80.78 GWHs, while power producers in contracts with distributors produced 18.22 GWH.

The frequent revisions in electricity tariffs, both positive and negative, create a sense of uncertainty for businesses and consumers. The large amount of electricity produced by net meter owners shows how Pakistani consumers are shifting away from the national grid in favour of solar panels, which provide them with self-reliance.

The transition to solar power continues despite the drop in tariffs and the recent winter package to reduce costs on additional units consumed. An increasing number of businesses and individuals alike have found electricity bills to be creating cash flow problems.

The 0.75 paisa tariff reduction pales in comparison to a staggering 155 percent tariff increase over the past three years. However, some relief is better than none at all, and for users who still have not transitioned to solar power, this move will certainly provide some respite.