The RLNG power generation cost in Pakistan surged by a record 242% to Rs47.4 per unit in July, rising sharply from less than Rs14 per unit in April as the government relied on expensive spot-market LNG cargoes after Qatar’s supplies were disrupted amid the US-Iran conflict.
The sharp increase in RLNG-based generation costs has prompted power companies to seek an additional Rs2.52 per unit fuel cost adjustment (FCA) from consumers in September electricity bills.
The proposed adjustment could impose an additional burden of around Rs36.5 billion on electricity consumers across the country.
The National Electric Power Regulatory Authority (Nepra) has scheduled a public hearing for August 27 to determine whether the additional demand from power companies is justified.
Expensive LNG Cargoes Push Up Power Costs
The increase in RLNG costs was mainly driven by the government’s purchase of five expensive LNG cargoes from the spot market in July.
Pakistan normally relies heavily on LNG supplies from Qatar, but shipments were suspended amid disruptions caused by the US-Iran conflict. This forced authorities to turn to the spot market, where LNG prices were considerably higher.
RLNG accounted for around 11% of Pakistan’s total electricity generation in July.
Despite this relatively limited contribution, the sharp increase in the cost of LNG-based generation had a significant impact on the overall fuel cost of electricity.
The situation is expected to worsen in the coming months because RLNG prices increased by almost one-third again in August.
Higher August RLNG costs could therefore translate into another increase in electricity bills, potentially affecting consumers through the October billing cycle.
RLNG Price Jumps 32% In August
The Oil and Gas Regulatory Authority (Ogra) notified a record 32% increase in RLNG prices for August.
The regulator fixed the August RLNG price at $25.83 per million British thermal units (mmBtu) for Sui Northern Gas Pipelines Ltd (SNGPL) and $25.09 per mmBtu for Sui Southern Gas Company Ltd (SSGC).
The imported LNG price translated into a retail RLNG price of around Rs7,204 per mmBtu, compared with approximately Rs5,450 per mmBtu in July.
The August price was based on five LNG cargoes purchased from the international spot market after Pakistan was unable to secure shipments from Qatar.
This represented the highest monthly increase in RLNG prices since the commodity was introduced into Pakistan’s energy mix around a decade ago.
RLNG prices had already increased by around 15% in July compared with June.
Compared with the February rate of $10.45 per mmBtu, equivalent to around Rs2,916, the August price represents an increase of approximately 148%.
Power Companies Seek Rs36.5bn From Consumers
The Central Power Purchasing Agency (CPPA) has filed a petition seeking a higher FCA for electricity consumed during July.
According to the petition, electricity consumption increased by around 6% year-on-year during the month.
Power consumption stood at approximately 14,501 GWh in July, compared with 13,666 GWh during the same month last year.
The reference fuel cost for July was set at Rs7.093 per unit, but the actual fuel cost reached around Rs9.61 per unit.
The difference has resulted in the proposed Rs2.52 per unit FCA.
If approved by Nepra, the adjustment would be recovered from consumers of ex-Wapda distribution companies as well as K-Electric through September electricity bills.
The total additional amount is estimated at approximately Rs36.55 billion.
Cheaper Sources Dominate Power Generation
The higher FCA demand has raised questions about the impact of expensive LNG generation because a significant portion of Pakistan’s electricity came from relatively cheap or zero-fuel-cost sources during July.
Around 40% of total electricity generation came from hydropower, which carries no direct fuel cost.
Local coal accounted for about 11%, while local gas contributed approximately 6.5%.
Nuclear power provided around 10.1% of the electricity supply, although its contribution was lower than the previous month.
Wind projects contributed around 4.5%, while solar accounted for approximately 0.7% and bagasse-based generation contributed around 0.3%.
This means that roughly 73% of electricity generation came from cheaper domestic or zero-fuel-cost sources, yet the sharp rise in LNG costs significantly increased the overall fuel cost.
Imported RLNG Far More Expensive Than Local Fuels
The cost difference between RLNG and other fuels further highlights the pressure created by expensive spot-market LNG.
Local coal-based power generation cost around Rs10.42 per unit, compared with Rs16.34 per unit for imported coal.
Local gas generation cost approximately Rs13.80 per unit, while RLNG-based generation cost surged to Rs47.38 per unit.
Nuclear generation remained among the cheaper sources, with a fuel cost of around Rs3 per unit in July, compared with Rs2.85 per unit in June.
High-speed diesel and furnace oil also contributed to the increase in fuel costs, but their combined share of total generation was only around 1.63%.
Generation from these expensive fuels cost approximately Rs55 per unit for diesel and Rs50 per unit for furnace oil.
Consumers Face More Electricity Cost Pressure
The latest developments indicate that Pakistan’s electricity consumers could face continued pressure from higher fuel costs in coming months.
Nepra has already approved an additional Rs9.8 billion burden on consumers by allowing a 75-paisa-per-unit increase in fuel costs for August billing.
The proposed July FCA would add another substantial amount if approved.
More importantly, the August increase in RLNG prices could create another round of higher generation costs.
Pakistan’s dependence on imported LNG exposes the power sector to international prices, shipping disruptions and geopolitical developments.
The suspension of Qatar supplies has demonstrated how quickly disruptions to LNG shipments can affect electricity generation costs.
As Nepra prepares to examine the latest FCA request, consumers face the possibility of another increase in electricity bills at a time when higher energy costs are already putting pressure on households and businesses.