Pakistan’s power sector continues to struggle under the weight of inefficiencies, with distribution companies (Discos) alone adding nearly Rs397 billion to the country’s circular debt in fiscal year 2024–25, it has emerged.
As per the details, the figure was revealed in the State of the Industry Report 2025 issued by the National Electric Power Regulatory Authority (Nepra), which warned that losses have become entrenched in the tariff system and are routinely passed on to consumers through higher electricity prices.
According to the report, Discos managed to recover only 93.5 percent of billed revenue, leaving a significant shortfall that directly fueled circular debt across the energy chain.
Transmission and distribution losses stood at 16.4 percent, well above the allowed limit of 11.77 percent, driven by theft, outdated networks and poor maintenance. Instead of absorbing these costs, utilities transferred them to consumers, inflating electricity bills.
Despite an installed generation capacity of 41,212 megawatts, electricity demand peaked at just over 33,000MW, leaving large plants idle but still paid for through consumer tariffs.
Transmission bottlenecks prevented cheaper electricity from reaching consumers, forcing reliance on costlier options. Rigid “take-or-pay” contracts further burdened the system, requiring the government to pay power producers even when plants remained unused.
Several thermal plants operated at low capacity but continued to receive full payments, pushing tariffs higher.
The government terminated contracts for 2,829MW of unused capacity, a move Nepra estimated could save more than Rs900 billion over time. Yet inefficiencies persisted, with major public-sector plants such as the Guddu Power Plant and Neelum Jhelum Hydropower Plant operating below potential.
Nepra noted that these shortcomings neutralised gains from tariff reductions offered by independent power producers.
The country’s installed generation capacity stood at 41,121MW as of June 30, 2025, down from 45,888MW a year earlier due to the retirement of inefficient plants. The addition of 884MW from the Suki Kinari hydropower project partly offset the reduction, but underutilisation remained a core problem.
Thermal and nuclear plants recorded an average utilisation factor of just 38.82 percent, keeping capacity payments stubbornly high despite surplus generation.
The Capacity Purchase Price averaged Rs14.21 per unit, accounting for 82 percent of consumer-end tariffs, making it the single largest component of electricity costs. Additional cost pressures came from operational penalties, with Part Load Adjustment Charges amounting to Rs46.4 billion and Non-Project.
Missed Volume costs standing at Rs13.3 billion. Though lower than last year, Nepra stressed these costs were largely avoidable with better planning and demand-side management.
The regulator also reported a surge in consumer complaints, particularly about overbilling, faulty meters and prolonged outages. Frustrated households and businesses are increasingly turning to rooftop solar solutions to escape high costs and unreliable supply.
Nepra concluded that without structural reforms, entrenched inefficiencies, rigid contracts and underutilised assets will continue to inflate tariffs and deepen Pakistan’s circular debt, leaving consumers to bear the brunt of mismanagement.