A surplus of problems

Heavy investment to get past the loadshedding era led to the current state of the power sector, which is now generating too much power at rates that are far above what could be considered fair or market-driven. While power prices in Pakistan are not obscenely high by international standards, they are not reflective of the buying power of the average Pakistani, largely because customers are forced to pay significantly more than the cost of production and any fair profit margin, because they are also on the hook for the cost associated with excess capacity and idle generation.

The annual performance report for FY25 by Nepra says that a staggering 61% of the Rs2.943 trillion power purchase cost went to capacity charges - fixed payments for power plants that are sitting idle. Thermal plants are running at just 42.5% of capacity, meaning that the cost of their output is effectively double what it should be.

While Nepra's own assessment — that past planning was undertaken without adequately forecasting demand — is not off the mark, it is an opinion formed through the benefit of hindsight. There is actually a fair argument to be made that, because the priority was addressing shortages, the path taken was the best of a bunch of bad options.

Indeed, Power Division officials recently accused Nepra of presenting a misleadingly grim picture, pointing to a reduction of over Rs780 billion in circular debt. This, they argued, represents tangible fiscal progress and a critical step toward solvency that the Nepra report allegedly downplays.

But the issues and achievements highlighted by the parties are not mutually exclusive. The debt reduction is a genuine accomplishment, but some of the reasons it reached astronomical levels are outlined in Nepra's report. In a way, while Power Division officials seem more focused on addressing the debt, Nepra is calling for the resolution of the cause of the debt. If we are to put the power sector in order, both sides of the problem must be addressed.