ISLAMABAD: Despite over 35 years of ‘reforms’ and policy interventions, Pakistan’s power sector remains incapable of instilling confidence in the country’s economic growth and in consumers’ trust, leading to gains secured from power producers through renegotiations evaporating amid unending inefficiencies.
This charge sheet has been framed by the National Electric Power Regulatory Authority (Nepra) against the policymakers and power sector managers in its flagship ‘State of the Industry Report 2025’, while conceding that regulatory powers for correction had been diluted through administrative and legal challenges.
It said the inefficiencies of the distribution companies (Discos) contributed around Rs400 billion to the circular debt, while law-abiding consumers paid around Rs235bn in debt servicing surcharge (DSS) in 2024-25, not due to normal business practices but to inefficiencies.
It said that despite some structural and policy-level interventions, “overall progress remained limited and insufficient to instil confidence in its ability to drive sustained industrial growth and provide meaningful relief to electricity consumers across industrial, commercial, agricultural, and residential categories. The sector continues to face deep-rooted operational and governance challenges that constrain its efficiency and undermine its potential contribution to economic development”.
It pointed out that underutilised generation capacity was resulting in a persistent financial burden in the form of capacity payments for idle plants, and the transmission network is both underutilised and constrained, contributing to higher transmission tariffs while also preventing the dispatch of electricity from cheaper and more efficient generation sources in accordance with the Economic Merit Order (EMO).
On the distribution side, many government-owned Discos continue to exhibit poor governance practices, with T&D losses exceeding allowable limits, a low bill recovery ratio, and load-shedding practices based on Aggregate Technical and Commercial (AT&C) losses. These inefficiencies further exacerbate the underutilisation of generation, transmission, and distribution assets and contribute to the circular debt problem.
It said the challenges confronting power sector entities, largely driven by the entities owned by the government, were complex and spanned across planning, execution, and operational domains. “Persistent inefficiencies in strategic planning, project implementation, and routine operations have hindered the sector’s ability to achieve financial sustainability and contribute effectively to national economic growth”, it said adding that these issues were further exacerbated by weak governance, limited accountability, and the absence of performance-driven management practices, all of which constrain the sector’s capacity to optimise its assets and consistently provide affordable, reliable electricity to consumers.
The regulator pointed out that renegotiations and termination of contracts led to decommissioning of 2,829MW to 41,121mw as of June 30, 2025, from 45,888MW as of June 30, 2024, with the addition of a 884MW hydropower plant, but the utilisation factor of thermal power plants, including nuclear, in the national grid remained only 38.82pc in 2024-25. Generation cost represents the largest component of the electricity tariff at the consumer level, accounting for approximately 82pc.
It appreciated the government’s efforts to reduce electricity tariffs but pointed out persistent operational inefficiencies in public-sector power plants, such as the 747MW Guddu Power Plant, the 969MW Neelum-Jhelum Hydropower Plant, and several other hydroelectric plants under Wapda, which were significantly undermining these initiatives. “Consequently, the intended financial relief from many IPPs’ tariff adjustments, as well as the retirement or decommissioning of other underperforming power plants, is being offset, limiting the overall effectiveness of sector reforms”.
On top of that, another factor adversely affecting overall generation costs was highlighted as the lower utilisation of coal-based power plants using Thar coal.
Reduced plant utilisation has negatively affected both the capacity and energy purchase prices, as the fixed costs of mining operations are embedded within the EPP component. The utilisation factor of Thar coal-based power plants stood at 67.23pc during 2024-25. Moreover, the delay in establishing a regular supply of Thar coal to Lucky Electric Power Company Ltd has further contributed to inefficiencies and higher generation costs.
A notable example of inefficiency was the underutilisation of the 4,000MW capacity Matiari-Lahore High Voltage Direct Current (HVDC) transmission line, whose utilisation factor remained only 35pc during 2024-25, despite payments being made based on a 100pc availability factor. This adversely affects both the transmission tariff and the overall cost of electricity.
The regulator put on record that “KE, Pesco, Hesco, Sepco, and Qesco are the poorest performers, with T&D losses far exceeding Nepra limits, low revenue recovery, excessive AT&C losses, prolonged load-shedding, mounting receivables, poor service quality, and high consumer dissatisfaction. Their performance is weak across nearly all operational and financial indicators”.
Operational inefficiencies persisted across all Discos, including KE. Delays in new connections, meter replacements, and net-metering approvals were common. Overbilling practices, particularly detection bills issued without due process, and frequent inflated billing complaints further undermined consumer trust.
It said despite over two decades of their incorporation, the majority of Discos largely failed to function as true corporate entities and were increasingly being brought under centralised control, and their Boards of Directors (BoDs) show little interest in improving the financial health of these companies or transforming them into organisations of international standard.
As if that was not enough, there was a lack of accountability for board members, Chief Executive Officers, and other officers and officials. This absence of deterrence has emboldened these entities to maintain the status quo, perpetuating inefficiencies and poor performance across the sector. On top of that, the regulator’s monitoring and enforcement drive had “been diluted by lengthy review, appeal, and petition processes, which were so time-consuming that they undermine the very purpose of enforcement actions”. Furthermore, the limitation on taking action against delinquent individuals weakens the regulator’s monitoring and enforcement efforts.
