ISLAMABAD – Federal Minister for Energy Awais Leghari has ordered an immediate suspension of electricity purchases that exceed the national least-cost benchmark, a move aimed at curbing rising consumer tariffs. The directive follows a review that uncovered distribution companies (Discos) buying power from small and captive plants at rates above the prescribed economic merit order.
Off-Merit Procurement Under Scrutiny
The minister’s order targets electricity procurement from Small Power Producers (SPPs) and Capt Power Plants (CPPs), which a review found were being dispatched outside the established least-cost framework. Officials said this practice has been inflating costs for end consumers, who already face high electricity bills.
Leghari instructed utilities to immediately align all power purchasing with the rules set by the National Electric Power Regulatory Authority (Nepra), including its Grid and Distribution Codes. The minister also directed the initiation of a formal inquiry to determine responsibility and ensure accountability for the violations.
Strict Compliance with Economic Merit Order
In a follow-up directive, the Power Division barred any off-merit electricity procurement from SPPs without explicit prior approval from the Independent System and Market Operator (ISMO). The division stated that all power offtake must be limited to cases that fall within the prevailing national merit order, determined through the prescribed cost-based mechanism.
Discos have been instructed to coordinate closely with ISMO to integrate SPPs and CPPs strictly under Economic Merit Order (EMO) principles, which dispatch generation based on the lowest incremental cost.
Key Directives Issued
- Immediate halt to power purchases above the national least-cost benchmark.
- Formal inquiry launched into Discos for alleged violations of procurement rules.
- All power procurement must comply with Nepra regulations and grid codes.
- Off-merit purchases from SPPs require prior ISMO approval.
- Discos must coordinate ISMO for proper power dispatch under EMO principles.
Impact on Consumer Tariffs
The government’s crackdown on off-merit power purchases is part of broader efforts to reduce the financial burden on consumers. Pakistan’s electricity sector has long been plagued by high costs, circular debt, and inefficiencies. By enforcing least-cost procurement, the energy ministry aims to lower the average tariff paid by households and industries.
Industry analysts say the move could help stabilize the power sector by eliminating costly side deals that bypass the merit order system. However, they caution that strict enforcement and transparency will be critical to achieving lasting results.
