ISLAMABAD: A panel of renowned energy specialists called for major reforms in electricity tariff structure and called upon the government to settle and manage the capacity payment issue with the Independent Power Producers (IPPs).

The speakers during the discussion titled `Pakistan`s Electricity Tariff Structure: Insights and Key Determinants` highlighted that one of the reasons for increased electricity bills was various taxes imposed on power usage such as imposition of the 18pc general sales tax (GST) by the federal government and electricity duty by provincialgovernments.

The discussion was organised by the Sustainable Development Policy Institute (SDPI) and the Network for Clean Energy Transition (NCET).

Dr Khalid Waleed, Research Fellow at SDPI, detailed Pakistan`s consumer categories and tariff-setting mechanisms, highlighting how the tariff structure is designed to reflect various consumer types and usage patterns.

He explained the mechanism behind the high electricity bills and the capacity charge, encompassing fixed operational and maintenance costs, return on equity, debt servicing, insurance, working capital financing fees, and procurement and construction costs are higher than the generation charge.

He said the energy price (EP), including fuel cost and variable operational and maintenance expenses, was projected to increase from Rs0.84 trillion in fiscal year 2023-24to Rs1.16 trillion in the current fiscal 2024-25, rising from Rs10.94 per unit to Rs15.65 unit. While the capacity price (CP) is anticipated to grow from Rs1.847 trillion in the previous fiscal year to Rs1.95 trillion in the current fiscal year that contribute 60pc of the overall power tariff.

Other speakers including Engr Ahad Nazir, Head of Center for Private Se ctor Engagement, SDPI, Zainab Babar, Research Associate, SDPI and Engr Ubaidur Rehman Zia, head of energy unit, SDPI emphasised the urgent need for reforms to make the electricity tariff structure more sustainable and equitable.

They said that the structure and determinants of tariffs have far-reaching implications, affecting not only household budgets but also the competitiveness of businesses and the overall economic stability in the country.

The speakers highlighting the criticality of the capacity payment component to the IPPs in the overall tariff.

However they added that to keep investor confidence, especially the Chinese who developed energy infrastructure at the time of need, Pakistan must honour the sanctity of contracts, and the way forward should be to dilute the negative impacts and explore options that are suitable for both sides of the equation.

It was highlighted that the existing tariff structure also lacks incentives for energy-efficient practices among consumers and there was a need for longterm planning with a strategic vision to revamp the policies and overall energy landscape in Pakistan.