ISLAMABAD: The price of electricity is expected to increase by one-fourth over the next eight years, according to a power division forecast, after a 50per centincreasein the pastthree years due to massive currency devaluation.

The average tariff is projected at Rs29.70 per unit by 2034, up by Rs5.70 from the existing rate of Rs24, said the power division in a working paper shared with stakeholders in the last week of July.

The report said the increase in tariffs over the last three years can largely be attributed to the rupee`s depreciation which led to `second round effects of inflation and a contractionary monetary policy that further escalated overall tariff`.

The average power purchase rates increased by almost 50pc from Rs16.77 per unit to Rs24.88 between FY2022 and 2025.

This included about a 115pc increase in annual capacity charges from Rs971bn to about Rs2.1tr, although energy payments slightly dropped by 11pc from Rs1.43tr to Rs1.27tr.

All in all, power purchase rates increased by almost 250pc to Rs24.88 per unit in FY2025 from Rs7.17 per unit in FY2016 before the induction of mega power projects, mostly under the ChinaPakistan Economic Corridor as capacity charges surged from Rs275bn to Rs2.1tr, an increase of 660pc, according to the power division.

Exchange rate impact The power division said the average base tariff largely remained unchanged between FY2023 and FY25 in dollar terms ($0.12 per unit).

However, due to exchange rate losses, effective base rate jumped 44pc to Rs35.50 per unit from Rs25 as capacity charges increased by 66pc to Rs18.4 per unit compared to Rs11 per unit.

The energy price was reported at Rs10.94 per unit in FY25 against Rs10.2 in FY23, a nominal change. According to the power division, the capacity costsdenominated in US dollars escalated from Rs11 to Rs18.4 mainly due to the depreciation of rupee against dollar from about Rs100 to Rs300.

The fuel costs generally remained flat as lower-cost generation capacities came online.

Therefore, `delinking capacity costs from impact of depreciation, and enhancing reliance on indigenous sources remains critical to ensure sustainability`, the power division advocated.

The overall tariff is further bloated by extraneous taxes and other duties, increasing the costs for the end-consumer.

Despite all efforts and reforms, both the average tariff and capacity charges would `keep growing`.

Going forward, capacity charges are estimated at Rs3.14tr in FY2034, up by 65pc, the power division said.

Deindustrialisation The power division also confirmed `deindustrialisation` that further contracted demand.

`Increase in electricity prices made industry uncompetitive, resulting in closure of industrial units and accelerating process of deindustrialisation`, it said and reported that industrial power consumption peaked in FY22 at 34 billion units (kWh) and declined to 28bn units in FY24, `largely due to higher prices and transition to off-grid generation` The power division said `inefficient pricing` increased the cost of debt servicing, further burdening consumers and contracting demand.

Further compounding the issues was the fact that despite tall claims, aggregate technical and commercial (ATC) losses remained mostly flat 18.9pc in FY2013 and 18.3pc in FY2024. ATC losses broadly cover the difference between units produced and recovered.

The power division forecast for slower growth in tariff 25 to 30pc over the next decade against over 260pc in the past decade comes on the back of an increase in generation from cleanfuel sources to 66pc by 2034 against 46pc in FY25.