Electricity demand rebounds on lower industrial tariffs and improved activity, while reduced LNG supplies and rising fuel costs push distribution companies to seek a Rs2.56 per unit adjustment.
Pakistan’s electricity demand recorded a notable recovery in the first quarter of fiscal year 2026-27 (1QFY27), increasing by 5.7% year on year, supported by lower industrial tariffs, a shift of industrial consumers towards the national grid and improving economic activity.
According to a power-sector analysis, electricity generation also strengthened in September 2026, rising 5.0% year on year to 13,217 gigawatt-hours (GWh). Demand stood 1% above the seven-year average for September, signalling an encouraging improvement in power-sector activity.
However, consumption remained below the September 2021 peak of 14,034 GWh, indicating that the recovery has yet to regain previous highs.
The rebound follows measures aimed at encouraging grid consumption, including an industrial and agricultural incremental consumption package, a PKR 4 per kilowatt-hour reduction in industrial tariffs and higher levies on captive gas consumption. Large-scale manufacturing (LSM) also expanded by 1.9% year on year during July-August FY27, providing further support to electricity demand.
Power generation exceeds NEPRA reference
September’s generation exceeded the National Electric Power Regulatory Authority’s (NEPRA) reference level, potentially supporting future quarterly tariff adjustments (QTAs).
Nevertheless, higher fuel costs continued to weigh on the sector. The adjusted fuel cost of electricity generation reached PKR 10.02 per kilowatt-hour (kWh), compared with the reference cost of PKR 7.46 per kWh.
Consequently, power distribution companies (DISCOs) sought a positive fuel charges adjustment (FCA) of PKR 2.56 per kWh for September 2026. The increase was attributed to a more expensive generation mix involving re-gasified liquefied natural gas (RLNG), high-speed diesel (HSD) and furnace oil (FO), alongside higher international oil prices.
Furnace oil and diesel generation climb
Furnace-oil-based generation remained elevated at 263 GWh in September, supported by RLNG supply disruptions and higher summer demand. HSD-based generation reached 213 GWh, its highest level since January 2022.
The continued reliance on furnace oil is expected to support utilisation and earnings for Nishat Power Limited (NPL), Nishat Chunian Power Limited (NCPL) and Nimir Energy Limited (NEL), particularly under the hybrid take-or-pay regime.
However, expensive oil-based generation also adds pressure to the overall cost of electricity production, potentially increasing the burden of fuel adjustments on consumers.
RLNG generation falls 55.7%
LNG-based power generation dropped 55.7% year on year to 804 GWh in September, reflecting reduced LNG imports amid geopolitical disruptions.
Of the six long-term cargoes originally scheduled for the month, Pakistan State Oil (PSO) imported only two under its long-term arrangement, according to the analysis.
Higher international oil prices also increased cargo costs, pushing the reported RLNG fuel cost to PKR 39.74 per kWh.
RLNG, HSD and furnace oil together accounted for 46.1% of the unadjusted fuel cost. Their respective contributions were PKR 2.42, PKR 1.00 and PKR 0.89 per kWh, out of a total unadjusted fuel cost of PKR 9.35 per kWh.
Hydel and coal generation provide support
Hydropower generation improved to 4,834 GWh in September, rising 1.1% year on year and standing 9% above the long-term September average of 4,419 GWh.
Improved water availability strengthened the contribution of low-cost hydel electricity, helping moderate overall generation costs and providing some relief from expensive thermal power.
Coal-based generation also increased sharply, reaching 3,482 GWh, up 56.8% year on year and the highest level recorded for any September.
Imported-coal generation surged 112% to 2,155 GWh, while local-coal generation increased 10% to 1,327 GWh. The increase reflected a shift towards coal amid reduced RLNG availability and elevated LNG costs.
The combination of higher coal and hydel output helped offset some of the impact of more expensive oil-based generation.
Power-sector recovery offers cautious optimism
Generation trends from December 2025 to March 2026 indicated improving grid stability, supported by industrial tariff reductions, targeted consumption incentives and higher levies on captive gas consumption.
Although softer demand in the fourth quarter of FY26 had threatened to undermine this momentum, the recovery in 1QFY27 offers a more encouraging outlook for electricity consumption and broader economic activity.
NEPRA currently projects power demand growth of 1.0% year on year for calendar year 2026. The latest increase in consumption suggests potential upside to that outlook, although sustained growth will depend on industrial activity, affordability, fuel availability and the competitiveness of grid electricity.
For the power sector, stronger demand could improve utilisation and revenue prospects. However, persistent dependence on expensive imported fuels remains a significant risk for generation costs and electricity tariffs.