DISCO losses drain Rs397b in FY25

NEPRA report reveals fiscal fixes cut circular debt, but utility performance remains poor

ISLAMABAD:

Pakistan's public-sector power distribution companies continued to miss key performance benchmarks in FY2024-25, as excessive transmission and distribution (T&D) losses and recovery shortfalls remained the main sources of financial stress in the electricity supply chain, according to the National Electric Power Regulatory Authority's (NEPRA) State of Industry Report 2025.

NEPRA data showed that DISCOs recorded average T&D losses of 17.55% during the year, far higher than the allowed limit of 11.43%. The excess losses created an unrecovered financial impact estimated at Rs265 billion. Despite repeated targets and regulatory oversight, most utilities failed to narrow the gap. The report pointed to persistent inefficiencies, outdated infrastructure and weak enforcement against theft and losses.

Recovery performance also remained below benchmarks. DISCOs achieved an overall recovery rate of 96.62% against the allowed 100%. This resulted in a recovery shortfall of about Rs132.46 billion. Several utilities posted significantly lower recovery ratios, with some falling below 40%. The data highlighted long-standing weaknesses in billing accuracy, collection systems and governance structures.

NEPRA attributed the shortfalls to widespread practices such as incorrect meter readings, excessive detection billing and the issuance of bills to inactive and government accounts that are unlikely to be settled. These practices inflated receivables without generating actual cash recoveries, increasing financial pressure across the sector.

The continued underperformance of public-sector DISCOs remained a key driver of circular debt accumulation. Although the overall stock of circular debt declined in FY2024-25 after exceeding Rs2.39 trillion a year earlier, NEPRA observed that the reduction was largely the result of fiscal measures rather than operational improvements. Public-sector distribution companies remained the dominant contributors.

By contrast, K-Electric (KE), the country's only privatised distribution utility, did not add to circular debt during the period under review. NEPRA noted that KE absorbed the financial impact of higher losses and lower recoveries internally instead of passing them on to the wider power market. However, KE consumers continued to pay the Debt Servicing Surcharge (DSS), under which Rs35.76 billion was collected on behalf of the federal government.

Operational challenges also extended to workplace safety. Fatal accidents across DISCOs and KE totalled 123 during FY2024-25, compared with 146 in the previous year. NEPRA said each fatality reflected serious deficiencies in safety practices and organisational culture, particularly in public-sector utilities.

Consumer service performance also remained under strain. NEPRA received more than 96,000 consumer complaints through its head office, regional offices and digital platforms during the year. Public-sector DISCOs accounted for most unresolved cases, particularly those related to billing disputes, delayed connections and service quality.

In its assessment of sector reforms, NEPRA noted that nearly three decades after unbundling, most DISCOs remain government-owned, administratively managed and commercially fragile. The regulator concluded that without meaningful structural reforms, circular debt will continue to be passed on to consumers through higher tariffs and fiscal support.