- The federal government is renegotiating contracts with independent power producers to lower electricity rates and address the unsustainable pricing structure.
- Energy Minister Awais Leghari aimed to reduce commercial electricity tariffs from 28 cents to 9 cents per unit and emphasised that changes must be mutually agreed upon to avoid legal issues.
The federal government is currently renegotiating contracts with independent power producers (IPPs) to reduce electricity rates nationwide, Energy Minister Awais Leghari revealed in a recent interview with Reuters. Leghari stated that the existing power pricing structure is no longer viable and that both the government and the IPPs recognise the need for change.
According to Leghari, the current system is unsustainable and requires adjustments from all stakeholders to achieve a fair and sustainable solution. He emphasised that concessions from the government and the IPPs will be necessary to develop a framework that benefits all parties involved.
One of the critical issues driving the renegotiations is the financial strain on the government, which has had to pass on new fixed costs and capacity payments to consumers due to a lack of funds. In response, some influential figures in the ruling coalition advocate for several critical changes. These proposed adjustments include reducing guaranteed returns for IPPs, capping the exchange rate used for payments in US dollars, and eliminating payments for unused power.
Leghari acknowledged that the current electricity rates are burdensome for domestic and commercial consumers. He specifically pointed out the need to lower tariffs for commercial users, aiming to reduce the rate from 28 cents per unit to 9 cents. This significant reduction is intended to alleviate financial pressure on businesses and stimulate economic activity.
Earlier, Leghari announced that a comprehensive review of IPP-related issues had been completed. He indicated that positive developments would be forthcoming and cautioned that any modifications to existing contracts must be mutually agreed upon. The government, he noted, cannot unilaterally alter agreements without risking legal complications.
The renegotiations come as part of a broader effort by the government to address the challenges facing the electricity sector. By seeking to lower costs and streamline payments, the administration hopes to create a more affordable and efficient power supply system that supports economic growth and improves the quality of life for consumers across the country. The outcome of these negotiations will be closely watched, as it has the potential to impact both the electricity market and the broader economy significantly.