ISLAMABAD – Pakistan’s electricity consumers paid a hefty amount of Rs13.397 trillion to Independent Power Producers (IPPs) over the past five years, with official data showing that billions of rupees were given to power plants that generated no electricity at all.
The figures expose financial burden created by Pakistan’s long-standing capacity payment system, under which many power producers got guaranteed payments simply for keeping their plants available, regardless of whether they are called upon to generate electricity.
Nearly 70 percent of money collected through electricity bills is transferred to IPPs, making these contractual payments one of the biggest reasons behind the country’s soaring power tariffs.
Of total Rs13.397 trillion paid to IPPs, only Rs7.275 trillion was spent on electricity actually supplied to the national grid. The remaining amount largely went toward capacity payments, including billions paid to power plants that remained idle throughout the period.
The data further reveal striking contradiction, while cost of generating electricity has steadily declined in recent years, capacity payments have continued to climb, preventing consumers from benefiting from lower generation costs and keeping electricity prices stubbornly high.
The rising burden of these fixed payments has become one of the most controversial issues in Pakistan’s energy sector, with households and businesses continuing to shoulder expensive electricity bills despite reduced power generation costs. So far, however, the government has not announced any comprehensive overhaul of the existing capacity payment mechanism.
Pakistan currently has around 90 to 100 operational Independent Power Producers. These privately owned and joint-venture companies operate under long-term Power Purchase Agreements (PPAs) signed with the government through the Central Power Purchasing Agency (CPPA-G). The agreements guarantee fixed capacity charges to many producers, ensuring payments even when their electricity is not dispatched to the national grid.
Among the most prominent operators are Hub Power Company (HUBCO) and its affiliated projects, Nishat Power, Nishat Chunian Power, Engro Powergen, Lalpir Power, Pak Gen, Atlas Power, Attock Gen, Orient Power, Saif Power, Sapphire Electric, and Halmore Power.
Several major energy projects also form major part of the sector, including China Power Hub Generation, Port Qasim Electric Power, Huaneng Shandong Ruyi’s Sahiwal coal plant, Shanghai Electric’s Thar project, and Lucky Electric. Other notable producers include Kot Addu Power Company (KAPCO), Kohinoor Energy, Rousch Power, Saba Power, Foundation Power, as well as several wind and solar projects, including Foundation Wind, Gul Ahmed Wind, and the Quaid-e-Azam Solar Park.
Ownership across Pakistan’s IPP sector is concentrated among dozens of influential domestic business groups and foreign investors, particularly Chinese companies. Some projects have also been linked to politically connected business interests through their ownership structures.
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