Islamabad, 08 May 2025 — The Central Power Purchasing Agency-Guaranteed (CPPA-G) has projected a reduction in the Power Purchase Price (PPP) for fiscal year 2025-26, estimating a decrease in the range of Re 0.30 per unit to Rs 2.25 per unit. The projected price drop comes as part of the agency’s efforts to optimize energy costs, aligning with its comprehensive analysis of various economic and technical factors.
According to the CPPA-G report submitted to the National Electric Power Regulatory Authority (Nepra), the forecasted PPP price is expected to fall from the current rate of Rs 27.35 per unit to Rs 24.75 per unit in 2025-26.
Seven Scenarios Assessed for PPP Forecast
The report includes seven scenarios developed through a sensitivity analysis considering key assumptions such as demand, hydrology, fuel prices, and exchange rates. The CPPA-G analyzed different outcomes based on indigenous fuel usage, the impact of clean fuels, and exchange rate fluctuations.
- Scenario 1: The lowest PPP, projected at Rs 24.75 per unit, assumes normal demand and a relatively favorable exchange rate.
- Scenario 5, which factors in a high exchange rate of Rs 300/$, lower hydrology, and standard fuel prices, forecasts a PPP of Rs 26.70 per unit, the highest among the scenarios.
Across all seven scenarios, the expected indigenous fuel share is projected to constitute 55% to 58% of the total energy mix, while clean fuels are expected to contribute between 52% and 56%.
PPP Reduction in Multiple Scenarios
The CPPA-G has also outlined projected reductions in the PPP for FY 2025-26, with Scenario 1 expecting the highest reduction of Rs 2.25 per unit, while Scenario 5 foresees a smaller reduction of just Rs 0.30 per unit. The table below summarizes the reductions across the various scenarios:
- Scenario 1: Rs 2.25 per unit reduction
- Scenario 2: Rs 0.96 per unit reduction
- Scenario 3: Rs 1.12 per unit reduction
- Scenario 4: Rs 0.67 per unit reduction
- Scenario 5: Rs 0.30 per unit reduction
- Scenario 6: Rs 0.45 per unit reduction
- Scenario 7: Rs 0.78 per unit reduction
Factors Affecting PPP Forecast
Several key assumptions influence the PPP forecast for FY 2025-26, including:
- Demand Growth: The forecast assumes demand growth in the range of 2.8% to 5%.
- Hydrological Conditions: Two hydrology scenarios are considered—normal hydrology based on a 5-year average, and a scenario reflecting lower hydrological inflows observed in recent years.
- Fuel Prices: Assumptions about fuel price changes—a 5% increase in imported fuel prices and a 5% decrease for low-price fuel scenarios—affect the forecast.
- Exchange Rate and Inflation: Projections are based on assumptions for the Rs/$ exchange rate and inflation rates for Pakistan and the U.S.
Conclusion and Future Considerations
The CPPA-G emphasizes that these projections are subject to change depending on variations in the underlying assumptions, such as future fuel prices, demand forecasts, and exchange rates. The forecasted PPP for FY 2025-26 will guide Nepra in setting monthly PPP reference values, although these will not account for any differential adjustments that may be made later.
CPPA-G has requested Nepra to review and consider the proposed PPP references, as well as its independent assessments, to finalize the PPP references for FY 2025-26.
