ISLAMABAD: Despite more than 35 years of reforms and policy interventions, Pakistan’s power sector continues to suffer from deep-rooted inefficiencies, failing to inspire confidence in economic growth or earn the trust of electricity consumers, according to the National Electric Power Regulatory Authority (Nepra).
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In its flagship State of the Industry Report 2025, Nepra presented a critical assessment of policymakers and power sector managers, stating that financial gains secured through renegotiations with power producers have largely been wiped out due to persistent operational and governance failures. The regulator also acknowledged that its corrective powers had been weakened by administrative and legal challenges.
The report noted that inefficiencies within distribution companies (Discos) contributed approximately Rs400 billion to the circular debt, while consumers paid around Rs235bn in debt servicing surcharge (DSS) during 2024-25. Nepra said this burden was not the result of normal business practices but of systemic inefficiencies.
While some structural and policy-level measures were introduced, Nepra said overall progress remained limited and insufficient to support sustained industrial growth or provide meaningful relief to consumers across residential, commercial, agricultural, and industrial sectors. The power sector, it added, continues to face entrenched operational and governance challenges that undermine its contribution to economic development.
The regulator highlighted that underutilised generation capacity continues to impose a heavy financial burden in the form of capacity payments for idle power plants. At the same time, the transmission network remains both constrained and underutilised, driving up tariffs and preventing electricity dispatch based on the Economic Merit Order.
On the distribution side, many government-owned Discos continue to suffer from poor governance, excessive transmission and distribution (T&D) losses, low bill recovery, and load-shedding based on Aggregate Technical and Commercial (AT&C) losses. These shortcomings further worsen the underutilisation of sector assets and fuel the circular debt.
Nepra said the challenges faced by state-owned power entities span planning, execution, and operations, compounded by weak accountability and the absence of performance-based management. As a result, the sector has struggled to achieve financial sustainability and provide affordable, reliable electricity.
The report noted that power generation capacity declined from 45,888MW in June 2024 to 41,121MW by June 2025 following the decommissioning of 2,829MW, despite the addition of an 884MW hydropower project. However, the utilisation factor of thermal power plants, including nuclear, remained low at 38.82pc during 2024-25. Generation costs account for about 82pc of the consumer electricity tariff.
Nepra acknowledged government efforts to reduce tariffs but said inefficiencies in public-sector plants — including the Guddu Power Plant, Neelum-Jhelum Hydropower Project, and several Wapda hydel stations — were offsetting the benefits of tariff adjustments and power plant retirements.
Lower utilisation of Thar coal-based power plants was also identified as a key contributor to high generation costs, with plant utilisation recorded at 67.23pc during 2024-25. Delays in supplying Thar coal to Lucky Electric Power Company further worsened inefficiencies.
The report also pointed to the underutilisation of the 4,000MW Matiari-Lahore HVDC transmission line, which operated at only 35pc capacity despite payments based on full availability, increasing transmission tariffs and overall electricity costs.
Nepra identified K-Electric, Pesco, Hesco, Sepco, and Qesco as the poorest-performing utilities, citing excessive losses, low recovery, prolonged load-shedding, weak service quality, and high consumer dissatisfaction. Operational issues such as delayed connections, meter replacements, net-metering approvals, overbilling, and inflated detection bills further eroded public trust.
The regulator concluded that most Discos had failed to operate as genuine corporate entities even decades after their incorporation. Weak boards, lack of accountability for senior management, and prolonged legal processes undermining enforcement actions have allowed inefficiencies to persist, limiting the impact of reforms across the power sector.
