By Ijaz Kakakhel

Capacity charges in the power sector reached Rs1.430 trillion during the 10 months of the fiscal year 2025-26, making up the major share of the country's generation cost and keeping pressure on electricity tariffs despite lower energy charges.

According to a document available with Wealth Pakistan, capacity charges stood at Rs1.430 trillion till April FY26, compared with energy charges of Rs1.023 trillion. Total generation cost during the 10 months reached Rs2.454 trillion. This means capacity payments accounted for 58% of total generation costs, while energy charges made up 42%.

Capacity charges are fixed payments made to power producers for keeping generation capacity available, whether or not electricity is fully purchased from them. Energy charges, on the other hand, are linked to actual electricity generation and fuel use. The latest figures show that fixed capacity payments have remained the dominant component of power generation costs.

The trend has become more visible over the last few years. In FY22, capacity charges were Rs829.108 billion against energy charges of Rs1.488 trillion, meaning energy charges were the larger part of the generation cost. However, the position changed in FY23 when capacity charges rose sharply to Rs1.306 trillion, slightly higher than energy charges of Rs1.271 trillion.

The burden increased further in FY24, when capacity charges climbed to Rs1.902 trillion, while energy charges declined to Rs1.189 trillion. Total generation cost also peaked at Rs3.091 trillion in FY24. In FY25, capacity charges eased slightly to Rs1.807 trillion, but they remained far above energy charges of Rs1.149 trillion.

The data show that from FY22 to FY25, capacity charges more than doubled, rising from Rs829 billion to Rs1.807 trillion. During the same period, energy charges declined from Rs1.488 trillion to Rs1.149 trillion. This shift indicates that the cost pressure in the power sector increasingly comes from fixed payments rather than the cost of actual electricity generation.

For FY26 through April, the Rs1.430 trillion capacity charge bill has already reached about 79% of the FY25 full-year level. Total generation cost for the 10 months has also reached Rs2.454 trillion, equivalent to around 83% of the previous full-year cost.

Cumulatively, from FY22 to April FY26, total generation cost stood at Rs13.397 trillion. Out of this, capacity charges accounted for Rs7.276 trillion, while energy charges stood at Rs6.122 trillion. This means capacity charges made up more than half of the total generation cost during the period.

The figures highlight a major structural challenge for Pakistan's power sector. Even when energy charges decline, electricity costs may not fall significantly if capacity payments remain high. For consumers and policymakers, the key issue is no longer only fuel cost, but the growing weight of fixed generation payments in the overall power tariff.

Credit: INP-WealthPk