Electricity bills: Govt struggling to find solution to capacity charges

ISLAMABAD: Prime Minister Shehbaz Sharif on Saturday sought proposals from the Ministry of Finance and Ministry of Energy to waive off capacity charges in electricity bills.

According to reports, the Ministry of Energy has recommended paying the Rs 4 trillion capacity costs in one go. This would allow the government to give assistance for people’s power expenses.

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According to sources, the idea also advises that the money be paid in a single installment to avoid future buildup of cyclical debt. This will alleviate the weight of circular debt and bring relief to the people.

The Ministry of Energy has also requested that the sum be funded by the Ministry of Finance. Once the sum is paid, the Ministry of Energy will be able to give customers with assistance on their power bills, according to sources.

However, the Ministry of Finance has connected power bill reduction to the International Monetary Fund’s (IMF) stipulations.

The recommendations were offered to Prime Minister Shehbaz Sharif, but no final decision has been made. It is important to state here that the Government of Pakistan expected capacity payments to IPPs totaling Rs 2,091 billion for the current fiscal year.

According to government data, nuclear reactors have the largest capacity payments, estimated at Rs 465.7 billion. Hydropower project capacity payments are likely to total Rs 446.4 billion, while imported coal power plants would cost Rs 395.4 billion.

The capacity payments for Thar coal power stations are expected to be Rs 256 billion, while LNG power projects would cost Rs 168 billion.

The capacity payments for wind power plants are expected to be Rs 168 billion, while furnace oil power plants would cost Rs 81.33 billion.

The term “capacity payment” refers to the monthly payment made by consumers to the power company in order to retain its capacity to generate energy and meet increasing demand.

Notably, these capacity payments to IPPs are made in US dollars, not Pakistani rupees. Former caretaker commerce minister Gohar Ejaz has been raising awareness through his statements and social media posts about the government’s mistakes and how these mistakes, if not corrected, will deteriorate the country’s economic conditions further