Pakistan’s electricity consumers continue to shoulder the heavy cost of capacity payments to Independent Power Producers (IPPs), according to newly released figures.
The data shows that billions of rupees have been paid to power producers over the past five years, making IPP payments one of the biggest contributors to high electricity bills.
According to the available data, a significant portion of every electricity bill paid by consumers is linked to payments made to Independent Power Producers (IPPs).
The figures indicate that around 30 percent of an electricity bill consists of the electricity price and taxes, while nearly 70 percent of the amount paid per unit is allocated to payments for IPPs, making it one of the primary reasons behind expensive electricity bills.
Rs13.397tr paid to IPPs in five years
The data shows that approximately Rs13.397 trillion has been paid to Independent Power Producers over the last five years. Of this amount, around Rs7.275 trillion was paid to private power plants for electricity generation.
The figures also reveal that a substantial amount collected from electricity consumers was paid to IPPs that did not generate electricity.
These payments, commonly referred to as capacity payments, are made under contractual agreements to ensure that generating capacity remains available, regardless of whether electricity is actually produced.
Capacity payments continue to increase
Despite a continuous decline in electricity production costs, the data indicates that capacity payments have continued to rise, adding further pressure to the country’s power sector.
The increasing cost of these payments has contributed to higher electricity tariffs, affecting households, businesses and industries across Pakistan.
Burden extends beyond consumers
According to the report, capacity payments are not only placing a heavy financial burden on electricity consumers but are also creating additional pressure on the national exchequer.
The continued rise in these obligations has become a key challenge for Pakistan’s energy sector, with their impact extending to both public finances and the overall cost of electricity.
