Capacity payments to power producers have doubled when compared with total price

Capacity payments to power producers have doubled when compared with total price


Nepra calls for closing obsolete power plants and increase power consumption

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ISLAMABAD (Dunya News/Web Desk) – People are seeing inflated electricity bills and the power sector’s circular debt is ballooning each passing month. One of the reasons behind this trend are the capacity payments to the power producers under the agreements signed with them.

In this connection, the National Electric Power Regulatory Authority (Nepra) shared a document which says the capacity payments [also called capacity charges] have doubled during the last five years when compared with the income through the overall price of the electricity generated.

One has to keep in mind the fact that the rupee devaluation is the basic factor behind the rising capacity payments, as the per unit price to be paid to power producers is determined in the US dollar, not in rupee.

With current ratio reaching to the level of capacity payments 67 per cent and the total power generation price 33 per cent, the regulator has also listed proposals to deal with the worsening scenario, which is reflected through the massive circular debt.

Read more: Can Nepra refuse power tariff hikes? Will it protect consumers against govt inefficiency?

The circular debt issue has made the energy sector business model sector unsustainable and necessitated the introduction of much-delayed reforms, as the International Monetary Fund (IMF) has also been calling for solve the issue.

According to the Nepra, the figures for the current fiscal year 2023-24 [FY24] for power price and capacity payments are Rs1,048 billion and Rs2,112, which translate into 33pc and 67pc respectively.

However, the total price stood at Rs1,251bn against the capacity payments of Rs1,321bn in FY23.
In FY22, the income [price] and the capacity payments were Rs1,430bn and Rs971bn respectively, while the figures for FY21 remained at Rs678bn and Rs856bn.

When it comes to FY20, the price of power generation remained at Rs621bn against the capacity payments of Rs856bn.

As far as the solution are concerned, the Nepra has recommended that measures should be taken to increase the power use and shutting down the obsolete power plants.