Pakistan’s electricity sector debate has become a debate about trust in the public sector. Consumers see rising bills, industry sees weakening competitiveness, and policymakers see a power sector whose costs keep rising through tariffs, subsidies and circular debt. The public anger is justifiable and has intensified sharply. But the deeper problem is not only that electricity has become expensive, but also that the current bill itself no longer explains what consumers are actually paying for.

Over the last three to five years, many consumers have seen electricity bills rise sharply. At the same time, consumer behaviour has changed. Households and businesses are reducing grid consumption, installing rooftop solar, shifting usage where possible and treating the grid as a backup service. This is rational behaviour for individual consumers, but it creates a difficult system problem: a large portion of Pakistan’s power-sector cost remains fixed even when the number of units sold by the grid falls.

The clearest example is capacity payments. Pakistan must pay generators for keeping capacity available under long-term contracts, even when that capacity utilisation is not optimal. Transmission and distribution networks also require investment, maintenance and readiness regardless of how many units a particular consumer uses in a given month.

Electricity consumers are not only paying for the energy they consume; they are also paying for the system’s readiness to serve demand whenever electricity is needed, and that readiness carries a cost. Yet the tariff structure has historically recovered much of this fixed cost through the per-unit energy price. This creates a structural mismatch. Costs that behave like fixed monthly obligations are hidden inside the variable kWh rate. The result is an inflated energy price, an opaque bill and a growing incentive for higher-income consumers to reduce grid consumption while still relying on the grid for backup at night, during cloudy periods or when their own systems are unavailable.

Net metering has made this mismatch more visible. A consumer with rooftop solar may export electricity during the day and import electricity at night. But a daytime solar unit is not economically identical to a nighttime unit supplied during higher-demand hours when more expensive generation may be running. A one-for-one adjustment of units can therefore mask the true cost of maintaining a reliable supply. The issue is not whether solar should be encouraged. It should be. The issue is whether the tariff should honestly reflect the capacity and network services that grid-connected consumers continue to use.

Final policy choices should be set using actual load research, MDI data, coincident-peak contribution and consumer affordability analysis

Final policy choices should be set using actual load research, MDI data, coincident-peak contribution and consumer affordability analysis

A better approach would be to redesign the bill so that major cost components are recovered separately. Instead of hiding capacity payments inside the kWh tariff, Pakistan should move towards a transparent structure in which consumers see a distribution charge, a capacity charge, an energy charge, a transmission or network charge, and taxes or government levies as distinct items. This would make the bill easier to understand and harder to distort.

The principle is simple. Consumers should pay for energy when they consume energy, and they should pay a fair share of capacity when the system must stand ready to serve their load. The........

© The Friday Times