LAHORE: Industrial consumers have rejected winter electricity package, saying that their power consumption was down by approximately 40% YoY in October 2024, and 60% compared to the year before.
To benefit from the incremental package, they said, industries must first recover their reduced consumption to previous years’ levels, which is calculated based on the 50-30-20 weighted average of the past three years for the same month. After this, they are required to increase power usage by an additional 25% to fully maximize benefits.
Omar Hameed said this mechanism is highly unrealistic, as increasing power consumption is tied to manufacturing demand, which depends on confirmed orders. Scaling up production also involves significant costs, including labour and other overheads, which far outweigh the limited relief offered by the 25% incremental savings, he added.
Another person, requesting anonymity, said the 25% cap on incremental consumption is also unnecessarily restrictive. Current demand remains highly suppressed due to skyrocketing tariffs over the past two years, meaning the tipping point for higher generation costs is still far of. He was of the view that removing the cap would allow industries greater flexibility to benefit from the package.
Furthermore, one energy expert said the proposed Rs 26.07/kWh tariff is misaligned with actual marginal generation costs, which, based on expected winter demand levels of 8,000-13,000 MW, is closer to Rs 17/kWh. The higher tariff figure provided by CPPA-G appears inflated and fails to create a meaningful incentive for industries to increase energy demand on the grid. A revised tariff closer to Rs 17/kWh would encourage significantly higher consumption and support the government’s energy demand and transition-to-grid objectives.
Additionally, he said, the package could be further improved by accounting for intra-day fluctuations in power demand and generation costs. During off-peak hours, particularly at night, demand is much lower, and marginal generation costs are even below Rs 17/kWh. A time-of-use (ToU) pricing structure for incremental consumption could make the package more effective by offering lower rates during low-demand periods. The necessary infrastructure for ToU pricing already exists, as industries are equipped with smart meters, making it easy to implement.
There was a consensus that the package can significantly improve its appeal and utility for industrial consumers by removing the 25% cap, reducing the incremental tariff closer to Rs 17/kWh, and introducing ToU pricing.
Copyright Business Recorder, 2024