Power Demand Regulator warns Pakistan could pay for unused electricity

Pakistan’s power regulator has warned that weak electricity demand, growing rooftop solar use and excess generation capacity could leave consumers paying for electricity they do not need.

National Electric Power Regulatory Authority Chairman Waseem Mukhtar raised the concerns in an additional note on the Integrated System Plan 2025-35.

The regulator approved the plan with a proposed $47.13 billion investment in new power generation projects over the next decade. The plan aims to meet expected increases in electricity demand.

Of the planned capacity, 17,485 megawatts will come from projects already allocated. Another 8,560MW will come through newly optimised capacity, while around 2,577MW of existing generation capacity is expected to retire.

The plan also proposes about $10.65 billion in investment to expand and upgrade Pakistan’s transmission network.

Mukhtar questioned major power-sector institutions over significant differences in their electricity demand forecasts. These include the Independent System and Market Operator, distribution companies and the Central Power Purchasing Agency-Guarantee.

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He said conflicting forecasts could make it difficult to determine how much new generation Pakistan needs and when it should add that capacity.

Mukhtar also warned that the power sector already faces a major problem of excess generation capacity. Consumers continue to pay capacity charges even as electricity sales and plant utilisation decline.

Lower electricity sales mean fixed capacity costs fall across fewer units of electricity. This increases the cost of each unit and puts further pressure on consumers.

Rising grid electricity prices are also pushing more consumers towards alternatives, particularly rooftop solar.

Many consumers now use the national grid mainly as a backup while meeting a growing share of their electricity needs through alternative sources.

Mukhtar described the situation as a cycle that could further weaken the power sector. Lower demand reduces the use of existing generation capacity, which increases capacity costs per unit.

Higher electricity prices then encourage more consumers to leave the grid, causing demand to fall further.

“This cycle is adversely affecting affordability, efficiency and long-term sustainability of the power sector,” Mukhtar said.

During a recent hearing on monthly fuel charges, the Independent System and Market Operator reported that electricity demand during daylight hours had fallen to about 12,000MW.

Mukhtar said the figure was broadly comparable with the electricity produced by power plants that must continue operating.

He called for coordinated measures to reduce grid electricity costs and make them more competitive with alternative energy sources.

Lower tariffs, he said, could encourage consumers to remain connected to the grid and increase their use of grid electricity.

Mukhtar also identified transmission capacity as a major challenge. Limited transmission infrastructure can prevent cheaper electricity from reaching areas with high demand.

The constraint can force the system to rely on more expensive electricity that is available closer to those areas.

He called for priority investment in transmission projects that can deliver lower-cost electricity to major demand centres.

At the same time, he warned against building transmission infrastructure without considering current and future electricity demand.

Poorly matched investments could create expensive assets that remain underused or eventually become stranded, he said.

Mukhtar argued that the Integrated System Plan should provide a comprehensive roadmap for expanding generation and transmission capacity.

He also called for the potential impact of new projects on consumer tariffs to form part of future planning. This, he said, would help policymakers and regulators make more sustainable investment decisions.

The chairman also questioned how some projects previously classified as “committed” should now be treated.

He noted that the Council of Common Interests established criteria and assumptions for committed projects in 2021. Pakistan’s electricity market has changed considerably since then, particularly because of the rapid expansion of rooftop solar and weaker demand growth.

Mukhtar said the country now needs a clear and transparent process to determine whether planned generation projects remain necessary based on current and expected demand.

The regulator’s concerns highlight the challenge facing Pakistan’s power sector: avoiding unnecessary investment while ensuring cheaper electricity reaches consumers and the national grid remains financially sustainable.