KARACHI:
Capacity charges are a significant component of electricity bills, reflecting the cost of maintaining power generation infrastructure to meet peak demand. While essential for ensuring a reliable power supply, the current structure of capacity charges has led to inflated bills for consumers, particularly during periods of low electricity consumption. To tackle this issue effectively, I am suggesting several reforms, as follows:
Transparent Cost Analysis: NEPRA should conduct a comprehensive analysis to ascertain the true costs associated with power generation, transmission and distribution. This will ensure that capacity charges accurately reflect the operational expenses incurred by power utilities.
Demand-Side Management: Implementing demand-side management strategies, such as promoting energy efficiency measures and incentivising off-peak consumption, can help reduce the need for excessive capacity and alleviate the financial burden on consumers.
Integration of Renewable Energy: Expediting the integration of renewable energy sources into the national grid can mitigate the reliance on expensive fossil fuel-based power plants, thereby reducing capacity charges over the long term.
Tariff Rationalisation: Reforming the tariff structure to align with actual usage patterns and economic realities will ensure fair and equitable distribution of costs among consumers.
It is imperative for stakeholders, including policymakers, regulators, power utilities and consumers, to collaborate closely to address the issue of capacity charges effectively. By implementing the proposed reforms, we can achieve a more sustainable and affordable electricity system that benefits all stakeholders
Muhammad Hammad
Islamabad
Published in The Express Tribune, May 15th, 2024.
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