Pressure on Pakistan’s 2027 Power Purchase Price: Nepra Questions CPPA-G Assumptions

The central fact is that the proposed average Power Purchase Price of Rs27.309 per kilowatt-hour for Pakistan in 2027 is not yet a final consumer tariff. It is CPPA-G’s base-case estimate, subject to a public hearing and further review by the National Electric Power Regulatory Authority, or Nepra. Treating the approximately 8 percent increase as an approved tariff would therefore be premature.

The figures presented at the hearing show that electricity costs are being driven by several variables at once. Fuel prices, the rupee-dollar exchange rate, RLNG availability, demand assumptions, financing rates and capacity payments all shape the 2027 projection. CPPA-G submitted six scenarios for calendar year 2027. Under the most favourable scenario, the Power Purchase Price could fall to Rs25.883 per unit. Under adverse assumptions, it could reach between Rs28.835 and Rs29.255 per unit.

The hearing’s context

CPPA-G’s base case assumes 2.6 percent growth in electricity demand and sales of approximately 130,081 gigawatt-hours. The calculation includes fuel costs, capacity charges, transmission charges, system losses, inflation, KIBOR, SOFR and exchange-rate assumptions. During the public hearing, Nepra sought clarification on RLNG supply, Brent prices, exchange rates and differences among the demand forecasts submitted by various institutions.

That makes this more than a tariff story. It is a question of forecast quality. CPPA-G, ISMO and the distribution companies did not submit identical demand projections. If actual sales fall below the forecast, fixed costs will be spread across fewer units. The per-unit cost could then rise again. I have spent years reading regulatory documents and match-day logs; the rule is similar in both fields: a conclusion cannot be audited without a clear definition and a stable base figure.

The real cost centre

Capacity charges, rather than fuel costs, create the largest pressure in the base case. The available figures put capacity charges at Rs14.717 per unit, compared with a base-case fuel-cost component of Rs10.141 per unit. Total power purchase costs are projected at Rs3.552 trillion. Cheaper fuel, by itself, will therefore not guarantee major relief.

Capacity charges are payments linked to available generation capacity. They do not move fully with the exact amount of electricity generated. If demand weakens and generation falls, a substantial part of these payments can remain. This structural point is often missing from public discussion that focuses only on fuel prices.

Even in the ideal scenario, capacity payments remain approximately Rs1.914 trillion. A cheaper RLNG or gas mix can reduce costs, but the extent of that reduction is limited. If higher fuel prices coincide with a weaker rupee, the risk increases quickly. The adverse scenario assumes an exchange rate of Rs290 to the dollar, while other calculations use Rs279.

Nepra instructed CPPA-G to revise the KIBOR assumption from 11.70 percent to 12 percent. That may look like a small change, but it demonstrates that the proposal remains adjustable. Financing costs, uncertain fuel availability and future Fuel Charges Adjustments can all alter the final figure.

Demand assumptions and the reverse effect

The base case assumes 2.6 percent demand growth without load management. A sensitivity scenario assumes growth of only 0.70 percent. The gap matters because electricity demand depends on more than economic activity. Higher tariffs, industrial migration away from the grid and reduced household consumption can all lower sales.

A higher tariff does not guarantee higher revenue. If consumers reduce consumption, industries shift to alternative power or production slows, total sales may decline. Capacity charges would then be distributed across fewer units, increasing pressure per unit. This creates a feedback loop: prices rise, demand weakens, fixed costs are spread over smaller sales, and the next calculation becomes more expensive.

Industrial representatives have objected on this basis. They argue that the incremental package may benefit a limited number of industries while imposing costs on more than 90 percent of consumers. Aamir Sheikh called for the immediate suspension of the package and clearer prospective application of Fuel Charges Adjustments. Businesses can plan only when they know how often and on what basis future winter adjustments will be calculated.

Contradictory signals and the data boundary

A non-sporting version of the “Croatia problem” appears here: a model can point in one direction while the result remains dependent on hidden variables. During the 2026 World Cup, I applied one xG definition to 1,580 events and later added columns for travel, rest days and extra time. This projection also requires more than one average price. Demand, fuel, currency and capacity payments must be published with separate sensitivity ranges.

The limits of the available material are clear. It does not provide a complete model of the final consumer tariff, distribution margins, taxes, subsidies or the effect on every consumer group. Treating Rs27.309 per unit as the direct household bill rate would therefore be incorrect. It is a proposed average cost of purchased power, not a final bill.

Nepra’s hearing is an essential accountability mechanism, but questioning assumptions is only the beginning. The regulator must show how CPPA-G, ISMO and distribution-company demand estimates are reconciled. It should also disclose how much the per-unit capacity cost would rise if sales fall below 130,081 gigawatt-hours.

Signals to track

Until the proposed rebasing date of January 1, 2027, six signals will matter: Nepra’s final determination, the rupee-dollar exchange rate, RLNG and crude prices, actual electricity sales, capacity payments and the future of the incremental industrial package. A major change in any one of them could alter the base case.

The next question is not whether an 8 percent increase will be approved. The real question is which demand, fuel and capacity-payment assumptions the regulator will accept. If demand falls below 2.6 percent while capacity payments remain near Rs1.914 trillion, even cheaper fuel will provide limited consumer relief. Nepra’s final decision will test whether Pakistan’s power system is selling a forecast or building a model that can withstand verification against actual sales.