ISLAMABAD: The Rs22.98 per kWh Incremental Consumption Package for industrial and agricultural consumers faces review as marginal electricity costs surged well above the fixed tariff, raising concerns over its sustainability and the burden on other consumers.
The National Electric Power Regulatory Authority (NEPRA) conducted a public hearing on Monday to review the Power Division’s motion seeking reconsideration of the Incremental Consumption Package for industrial and private agricultural consumers across XW-DISCOs and K-Electric.
The package applies to both Time-of-Use (ToU) and Non-Time-of-Use consumers and covers incremental electricity consumption during peak and off-peak periods.
The Power Division told the hearing that the fixed tariff of Rs22.98 per kilowatt-hour (kWh) had come under significant pressure as marginal costs exceeded the package rate during several months.
According to the presentation, the weighted average marginal cost stood at Rs27.58/kWh from December through May, significantly higher than the Rs22.98/kWh package tariff.
After adjusting for transmission and distribution losses, the weighted average marginal cost increased to Rs31.83/kWh, further widening the gap between the actual cost of incremental electricity and the tariff charged under the package.
The cost pressure was particularly high in April and May. The average marginal cost reached Rs36.71/kWh in April and Rs33.98/kWh in May.
On a loss-adjusted basis, the marginal cost climbed to Rs42.37/kWh in April and Rs39.22/kWh in May, according to the Power Division.
The April loss-adjusted marginal cost was therefore Rs19.39 per unit above the package tariff, while the gap stood at Rs16.24 per unit in May.
The Power Division said the difference between the package tariff and the higher marginal cost was, pending approval by the power regulator, being borne by other electricity consumers across the board.
This has emerged as a central issue in the ongoing semi-annual review because the existing package effectively requires other consumers to absorb the difference between the package tariff and the actual marginal cost.
The Incremental Consumption Package also contains a separate safeguard linked to consumption growth. A review is triggered when combined industrial and agricultural consumption exceeds 25% above the baseline.
The presentation showed that consumption growth crossed the threshold in January, February and April. Monthly growth reached 25.13% in January, 26.20% in February, while April recorded the highest growth of 34.81%.
Consumption growth during the other months remained below the 25% monthly threshold.
The semi-annual review provides another basis for considering an adjustment to the tariff. The mechanism requires reviews to maintain cost-revenue alignment and allows marginal tariffs to be adjusted when necessary.
The scheme must terminate if an upward adjustment becomes necessary during two consecutive reviews.
The Ministry of Energy (Power Division) was expected to submit the required information after stakeholder consultations, with the expected timeline set for the first week of June 2026.
However, the raw data was provided to NEPRA on July 29, 2026.
After NEPRA requested a proposal following consultations with stakeholders, the Power Division responded on September 9, 2026, requesting the regulator to conduct proceedings on the matter.
According to the presentation, the six-month weighted average marginal rate stood at around Rs32/kWh, while four months had already passed into the second review period.
This has raised the question of whether the package should be suspended as marginal electricity costs continue to remain substantially higher than the fixed package rate.
The presentation also showed significant differences in effective break-even prices among consumer categories.
For B1 peak consumers, the effective break-even price was Rs31.15/kWh, while the break-even price for B2 Time-of-Use consumers stood at Rs29.05/kWh.
The corresponding break-even prices for B3, B4 and B5 consumers were Rs30.03/kWh, Rs29.62/kWh and Rs32.91/kWh, respectively.
The figures indicate that the Rs22.98/kWh package rate is below the effective break-even levels calculated for all the categories presented to the regulator.
The key issue before NEPRA is whether the existing Rs22.98/kWh rate continues to reflect the actual marginal cost of supplying incremental electricity to participating industrial and agricultural consumers.
The regulator’s decision could determine whether the package tariff is increased to reflect prevailing costs or whether the package is suspended if the conditions for termination are considered to have been met.
Interveners seek revision or suspension
During the hearing, intervener Rehan Javed called for the package rate to be revised to the actual marginal cost with effect from June 2026.
He also called for the marginal-price difference charged to non-beneficiary consumers from June 2026 to be refunded.
Javed proposed that the difference should be recovered from the beneficiaries at the revised rate, while any residual amount should be recovered from the Government of Pakistan as the sponsor of the package.
Another intervener, Amir Sheikh, raised concerns over the cross-subsidy implications of the package, arguing that the arrangement was increasing the burden on domestic and commercial electricity consumers.
He said the package was increasing cross-subsidies for domestic and commercial users, while the majority of industry was effectively bearing the burden of subsidising a smaller group of beneficiaries.
Sheikh also questioned the continued need for the package following implementation of the gas levy and the resulting conversion of captive power consumers to the national grid.
“Gas levy implementation forced captive grid conversion, so package was not required,” he said.
He further argued that load-shedding alongside reduced-cost electricity packages for industrial and agricultural consumers was contradictory.
“Doing load shed and allowing reduced cost packages to Industrial & Agri consumer is self-contradictory,” he said.
He called for the package to be suspended, saying, “The only fair and sound decision is to suspend the package.”
The NEPRA proceedings have placed the future of the Rs22.98/kWh Incremental Consumption Package under scrutiny, with the regulator required to assess its financial sustainability in light of higher marginal generation costs, consumption-growth triggers, break-even prices and the potential cross-subsidy burden on consumers outside the package.