The capacity payments these days are talk of the town and our criticism has been grossly misplaced when it comes to huge electricity bills, and who the real culprits are.
Further, he likes of some of our ex-CT ministers, do not understand how power or energy sector works. Commenting and criticizing are easy, while not seeing where the problem is and what solutions can be offered for a better outcome.
Energy planning, with no direction and coherence in policy, has been a plain disaster by our policymakers in the last 22 years at least (since 2002 policy).
Capacity payments are not really a very big issue. Capacity paynents are around Rs 18/kwh, while massive and excessive taxes (40-45% of the bill), massive circular debt portion, rising T&D losses, thefts, and system/grid inefficiencies, losses of Discos, all have been added to the electricity bill today.
Govt itself has more than 50% direct stake in IPPs, especially under CPEC, and govt itself is the recipient of most of the capacity payment’s.
Chinese were invited by us to invest and the policy with protected returns were offered to all, and not just to chinese. They came when most denied to invest in Pakistan due to our own follies.
Now, Chinese have in fact stopped charging interest cost since FY23 till FY25, while NEPRA is still making it part of the tariff. NEPRA does not have any idea how time value of money works.
Also, circular debt is a massive inefficiency on part of the govt and its machinery, but its charging consumer in the bill for that as well.
Further, depreciation in PKR/$ parity in the past (2018, and then 2021) due to massive CAD, has had a huge impact on payments as well.
Then, little merit order is being followed, as efficient plants are in south while inefficient plants in north are being run.
Further peak demand, seasonality and cyclicality also comes into play where the govts (the single player in the entire energy chain) have hardly planned how to manage the same.
Plants setup under CPEC were front-loaded, like their payoffs are early in first 10 years compared to 25-40 years of their life.
Luckily, Pakistan currently has more clean mix of energy production, like over 50% (hydel and nuclear) and 75% is through local resource.
Quick solutions are there, like IPPs debt can be reproflied to longer tenure, govt taxes should be reduced, merit order should be followed, inefficiencies should be plugged in the T&D sector and not charged ro consumers, govt should come out of this business, and multi-buyer/seller market should be setup (liberalization and deregulation), breaking Discos into smaller ones need to be done (provincialization) and so on.
Further, if anyone is to be blamed, its the various govts, policymakers, and those who did not even attempt to change or amend these policies over time while continued to add generation capacities without investing in thw transmissiom & distribution.
So, most people on twitter/social media/ex-CT ministers confuse more with their popular statements and sensational tweets, without having a thorough understanding of the issues and solutions.
