Why electricity costs will rise in 2026 despite cheaper hydropower

ISLAMABAD: Electricity consumers in Pakistan will continue to bear a heavy financial burden this year, as the government is expected to pay Rs 2,163 billion in capacity payments to power producers, according to official documents.

The documents show that the average power purchase price for the current year has been estimated at Rs 25.32 per unit. For 2026, the total cost of purchasing electricity is projected to rise sharply to Rs 3,185 billion, reflecting growing pressure on the power sector.

Most of Pakistan’s electricity this year will be generated from hydropower and nuclear fuel, which are among the cheaper sources. The estimated cost of electricity produced from water is Rs 12 per unit, while nuclear energy will cost Rs 20.85 per unit.

However, power generated from imported fuels will remain much more expensive. In 2026, electricity from imported coal is expected to cost Rs 45.94 per unit, while power from furnace oil will cost Rs 45.97 per unit. Electricity from imported LNG is estimated at Rs 28.95 per unit, and from local coal at Rs 25.27 per unit.

Cheaper sources include bagasse, which will cost Rs 17.66 per unit, and local gas, which will cost Rs 14.51 per unit.

Despite the higher use of cheaper energy sources, the massive capacity payments mean consumers will continue to pay high electricity bills in the coming year.

Earlier today, in welcome news for power consumers in the country,  the Pakistan government has decided not to increase the average basic electricity tariff.

This was announced by the Additional Secretary of Power during a review plea hearing in the National Electric Power Regulatory Authority (NEPRA). The power division official said the government will not increase the power tariff as adjustments have been made to the subsidy. During a briefing to NEPRA, the Power Division highlighted that the energy mix has changed since July.

Power Division officials confirmed that the government has decided against any tariff revision at this time. Currently, consumers across all categories are receiving Rs62.9 billion in subsidies.