Capacity payments surpass power generation cost in Pakistan

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Consumers pay Rs1,565bn in capacity payments last fiscal year, exceeding Rs1,167bn generation cost

The massive burden of capacity payments has emerged as a major factor behind Pakistan’s high electricity costs, with consumers paying more to power plants for available generation capacity than the actual cost of producing electricity.

Official documents show that electricity consumers paid Rs1,565 billion in capacity payments during the last fiscal year, while total electricity collections stood at Rs2,935 billion.

The financial burden reflected in electricity bills is not limited to the actual cost of generating power.

A significant portion of the money collected from consumers was paid to power plants through capacity payments, which are charges made separately from the cost of electricity actually generated.

According to the documents, the cost of electricity generation during the last fiscal year stood at Rs1,167 billion. In comparison, capacity payments reached Rs1,565 billion, meaning the financial burden of capacity payments surpassed the actual generation cost.

Electricity consumers collectively paid Rs2,935 billion through their bills during the last fiscal year, according to official figures.

Of this amount, Rs1,565 billion went toward capacity payments to power plants, while consumers also paid Rs205 billion in General Sales Tax as part of their electricity bills.

The figures highlight the substantial financial burden carried by consumers beyond the basic cost of producing electricity.

Also Read: IMF demands removal of subsidies for up to 200 electricity units

Power plants operating on imported coal received the largest share of capacity payments during the fiscal year.

According to official documents, Rs635 billion was paid in capacity payments to imported coal-based power plants. Power plants using imported RLNG received Rs527 billion, while Thar coal-based power plants were paid Rs463 billion.

Nuclear power plants also received substantial capacity payments, with Rs469 billion paid to them during the fiscal year.

The figures have renewed attention on the structure of Pakistan’s power-sector costs, particularly the impact of capacity payments on electricity bills.

With capacity payments exceeding the actual cost of generation, the payments represent a significant component of the financial burden ultimately borne by electricity consumers.

The latest official data therefore highlight capacity payments as a key factor contributing to the high cost of electricity in Pakistan.

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