Energy Ministry Announces Major Reduction in Electricity Prices by June
The Ministry of Energy has pledged a substantial reduction in electricity prices by June, offering much-needed relief to consumers burdened by soaring energy costs.
Key Developments Discussed in Senate Energy Committee
The announcement came during a meeting of the Senate Standing Committee on Energy, chaired by Senator Mohsin Aziz. The session focused on measures to address the energy crisis, including renegotiating contracts with independent power producers (IPPs) and overhauling the power sector.
Read More: Electricity Prices Anticipated to Drop Soon
Highlights of the Discussion
- Potential Consumer Relief:
- Termination of contracts with 15 IPPs could save consumers Rs802 billion.
- The closure of five IPPs has already resulted in savings of Rs411 billion.
- Conversion of tariff rates for eight IPPs from dollars to rupees and revisiting agreements could lead to an additional Rs1,040 billion in relief.
- Abolishing Capacity Payment:
- The government plans to remove the capacity payment condition for 15 IPPs operating under the “take-and-pay” system, aiming to reduce unnecessary costs.
Privatization of Distribution Companies (DISCOs)
As part of a broader reform, the Ministry of Energy has outlined plans to privatize nine out of the 11 distribution companies (DISCOs) to enhance efficiency and curb losses.
Privatization Phases:
- Phase 1: Islamabad Electric Supply Company (IESCO), Faisalabad Electric Supply Company (FESCO), and Gujranwala Electric Power Company (GEPCO).
- Phase 2: Lahore Electric Supply Company (LESCO), Multan Electric Power Company (MEPCO), and Hazara Electric Supply Company (HAZECO).
- Phase 3: Hyderabad Electric Supply Company (HESCO), Sukkur Electric Power Company (SEPCCO), and Peshawar Electric Supply Company (PESCO).
DISCOs with high losses, such as Tribal Electric Supply Company (TESCO) and Quetta Electric Supply Company (QESCO), will not be privatized.
Questions on Feasibility and Global Trends
Committee member Shibli Faraz raised concerns about the feasibility of reducing electricity costs given the circular debt and massive losses in the power sector. “How much scope do you have to make electricity cheaper?” he inquired, urging transparency.
He also criticized the reliance on outdated power sector models, emphasizing the need for innovation and modernization to align with global practices.
Challenges Ahead
The government faces mounting pressure to reform its power sector, reduce circular debt, and address inefficiencies. With billions of rupees at stake and global trends pushing for cost-effective energy solutions, the success of these initiatives will be critical in providing long-term relief to consumers.
