ISLAMABAD: Poor performance by Pakistan’s power distribution companies (Discos) added nearly Rs397 billion to the country’s circular debt during fiscal year 2024–25, as inefficiencies, power theft and transmission bottlenecks continued to weigh heavily on the energy sector, according to a new report by the National Electric Power Regulatory Authority (Nepra).
In its State of the Industry Report 2025, Nepra warned that inefficiency has become deeply embedded in the tariff structure, with losses routinely passed on to consumers through higher electricity prices while utilities face little accountability.
The regulator revealed that Discos recovered only 93.5% of billed revenue, leaving a massive gap between billed and collected amounts. This shortfall directly fueled circular debt — unpaid obligations that cascade through the power supply chain, from fuel suppliers to power producers.
Nepra noted that weak Disco performance alone contributed Rs397bn to circular debt during the year, calling the situation “normalised inefficiency” where utilities miss targets without meaningful penalties.
Electricity demand peaked at just over 33,000 megawatts, while installed capacity stood at more than 41,000 megawatts, leaving large power plants idle but still paid for through consumer tariffs. Transmission constraints prevented cheaper electricity from efficient plants from reaching consumers, forcing reliance on costlier options.
The report said combined transmission and distribution losses reached 16.4%, far above the allowed 11.77%, driven by theft, outdated infrastructure and poor maintenance. These costs were largely transferred to consumers instead of being absorbed by utilities.
Rigid long-term “take-or-pay” contracts further inflated tariffs, as the government continued paying power producers even when plants were underutilised. Nepra said the termination of contracts for 2,829MW of unused capacity could save over Rs900 billion over time.
Public frustration also intensified, with complaints rising over overbilling, faulty meters and prolonged outages, pushing more households and businesses toward rooftop solar systems to escape high costs and unreliable supply.
As of June 30, 2025, Pakistan’s installed generation capacity stood at 41,121MW, down from 45,888MW a year earlier following the retirement of inefficient plants. However, utilisation remained low, with thermal and nuclear plants operating at just 38.82%, keeping capacity payments high.
Nepra said the Capacity Purchase Price (CPP) averaged Rs14.21 per unit, accounting for nearly 82% of the consumer-end electricity tariff, making it the largest contributor to power costs.
Despite tariff reduction efforts by some independent power producers, gains were offset by poor performance at major public-sector plants, including Guddu Power Plant and Neelum Jhelum Hydropower Project, which continued to operate below capacity.