Hidden costs drive power prices up 70%

A study of Pakistan’s power tariff for end-consumers reveals that domestic households and businesses are being unexpectedly charged hidden costs, including US inflation and interest on circular debt. These factors significantly raise the power price for end-users to unaffordable levels, necessitating the government to renegotiate power purchase agreements (PPA) with the power plant operators soon. Many independent power producers (IPPs) still charge monthly bills for their electricity sales in US dollar denominations from the government under the US dollar indexation of their productions and sales, leaving no room for additionally charging US inflation from Pakistani consumers. The US indexation protects IPPs from the impacts of rupee depreciation against the greenback and local inflation. Interestingly, local power consumers are also being charged for increases in local (consumer price index/CPI) inflation readings.