Unusual RLNG price drives up electricity cost

Pakistan's electricity costs have dramatically increased due to a record surge in the price of regasified liquefied natural gas (RLNG). In July, the cost of RLNG-based power generation jumped by 242%, reaching Rs47.4 per unit, a significant rise from less than Rs14 per unit in April.

This sharp increase is primarily due to the government's procurement of five expensive LNG cargoes from the spot market. Supplies from Qatar were suspended following the US-Iran war, forcing Pakistan to seek alternative, costlier sources. Despite a large portion of electricity being generated from cheaper domestic fuel sources, the high cost of imported LNG is driving up overall power prices.

Power companies are now petitioning the National Electric Power Regulatory Authority (Nepra) for a Rs2.52 per unit increase in fuel cost adjustment (FCA) for consumers in their September bills. This would amount to an additional Rs36.5 billion burden. Nepra has scheduled a public hearing to scrutinize the justification for this demand.

The situation is expected to worsen, as RLNG prices saw another one-third jump in August. This will translate into further consumer costs in October billing. The Oil and Gas Regulatory Authority (Ogra) had already notified a record 32% increase in RLNG prices for August, with rates reaching $25.83 per mmBtu for Sui Northern Gas Pipelines Ltd (SNGPL) and $25.09 per mmBtu for Sui Southern Gas Company Ltd (SSGCL). This marks the highest-ever increase in RLNG prices in the commodity's decade-long history.