Electricity demand reaches 15,122MW as hydropower and coal generation surge, while higher RLNG and furnace-oil use pushes up fuel costs.
KARACHI: Pakistan’s power demand showed a meaningful recovery in July 2026, rising 7.1 per cent year-on-year (YoY) to 15,122MW, according to a report by Arif Habib Limited.
The report said power demand in July was 2.3 per cent above the seven-year July average, signalling a recovery in power-sector activity and broader economic growth.
Although demand remained below the 15,678MW peak recorded in July 2021, the latest increase points to improving electricity consumption.
Power generation also exceeded the National Electric Power Regulatory Authority (NEPRA) reference level. The brokerage attributed the increase to lower tariffs, a shift of industrial consumers towards the national grid, incremental consumption packages for industrial and agricultural consumers and improved economic activity.
Large-scale manufacturing (LSM) increased 5.8 per cent YoY during 11MFY26, supporting the recovery in electricity demand.
Generation exceeding the reference level could also support future quarterly tariff adjustments (QTAs), according to the report.
Power generation cost rises 38.1%
The adjusted fuel cost of power generation stood at Rs9.61 per kWh in July 2026, compared with the reference cost of Rs7.09 per kWh.
As a result, distribution companies (DISCOs) sought a positive Fuel Charges Adjustment (FCA) of Rs2.52 per kWh for July, the highest level since June 2024.
The higher FCA was attributed to greater reliance on RLNG and furnace oil, including spot RLNG cargoes, while higher international oil prices also increased generation costs.
The unadjusted fuel cost stood at Rs10.75 per kWh, with RLNG and furnace oil together accounting for 54 per cent of the total. RLNG contributed Rs5.10 per kWh, while furnace oil accounted for Rs0.71 per kWh.
Furnace-oil generation surges
Furnace-oil-based generation increased 115 per cent month-on-month to 200GWh in July, driven by disruptions in RLNG supplies and higher summer electricity demand.
The report said NPL, NCPL and NEL are expected to see significant utilisation, which could support earnings for companies operating under the hybrid take-and-pay regime.
LNG-based generation declines
LNG-based power generation fell 33.2 per cent YoY to 1,629GWh in July, reflecting a sharp decline in LNG imports amid geopolitical disruptions.
Of the seven long-term cargoes originally scheduled for the month, none were imported by Pakistan State Oil (PSO) under its long-term contract.
However, Pakistan LNG Limited (PLL) imported five spot cargoes at a 20.1 per cent DES slope, pushing the RLNG fuel cost to Rs47.38 per kWh, the highest on record.
The higher RLNG cost contributed to the increase in the FCA for July.
Hydropower hits record July output
Hydropower generation reached a record 6,019GWh in July, increasing 6 per cent YoY and standing 32 per cent above the long-term July average of 4,560GWh.
The report described July’s hydel output as the highest ever recorded for the month, with stronger water availability supporting the improvement.
The sustained increase in hydropower generation is strengthening the low-cost generation mix and providing some relief to overall generation costs and FCA.
Coal generation rises 44%
Coal-based generation reached 3,819GWh in July, up 44 per cent YoY and the highest level recorded for any July.
Imported-coal generation surged 90 per cent YoY to 2,169GWh, while local coal-based generation increased 10 per cent to 1,650GWh.
Imported coal accounted for around 57 per cent of total coal generation during the month.
The report attributed the increase in coal-based generation to reduced RLNG availability, elevated LNG costs and higher power demand.
The greater reliance on coal, combined with robust hydropower output, helped offset some of the impact of expensive thermal generation.
Industrial tariffs support grid demand
Generation trends between December 2025 and March 2026 showed improving grid stability, supported by a Rs4 per kWh reduction in industrial tariffs, targeted incentive packages and higher levies on captive gas consumption.
Although softer electricity demand in the fourth quarter of FY2026 posed a near-term risk to the recovery, the rebound in July provides a positive signal for the power sector and wider economic activity.
NEPRA currently projects 1.0 per cent YoY growth in power demand for calendar year 2026, according to the report.