Weak performance by Pakistan’s power distribution companies (DISCOs) contributed to a Rs397 billion increase in the country’s circular debt during the financial year 2024-25 (FY25), the National Electric Power Regulatory Authority (NEPRA) said in its State of the Industry Report 2025 released on Friday.
The report highlighted that efforts to rationalise and retire comparatively high-cost, underutilised generation capacity coupled with “rigorous negotiations with Independent Power Producers (IPPs)” to reduce tariffs were a milestone.
However, it cautioned that the energy sector had deep-rooted inefficiencies, inadequate planning, lack of digitised and reliable data, and weak governance was among other causes of concern.
“Overall, weak DISCO performance is a major contributor to circular debt, adding approximately Rs397 billion during the reporting period [FY25]. Load-shedding based on high AT&C [Aggregate Technical & Commercial] losses is both unlawful and inequitable, unfairly penalising compliant consumers while underutilising Take or Pay generation capacity and deepening inefficiencies across the power sector,” the report read.
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The regulator also added that the sector stood at an inflection point with the “old era of scarcity is ending”, but the new era, defined by surplus capacity, structural cost pressures, and shifting demand might “prove to be even more complex”.
Operational inefficiencies persist across all DISCOs, including K-Electric (KE). Delays in new connections, meter replacements, and net-metering approvals are common. Overbilling practices, particularly detection bills issued without due process, and frequent inflated billing complaints further undermine consumer trust.
In its detailed assessment, NEPRA also stated that despite structural and policy-level interventions, overall progress remained limited and insufficient.
Meanwhile, total generation capacity decreased to 41,121 megawatts (MW) at the end of FY25, from 45,888MW at the end of FY24, largely due to efforts to reduce the ‘Take or Pay’ electric power generation capacity by retiring or decommissioning inefficient power plants.
NEPRA also stressed that the poor performance of National Grid Company of Pakistan Limited (NGC) was not only affecting its own transmission tariff, but also increasing overall generation cost.
“A significant number of constraints in the NGC system is forcing power plants to operate in violation of the economic merit order. It has been observed that every transmission project is faced with delays and cost overruns. Among these, the delay in completing the interconnection between K-Electric and NGC systems, the Lahore-North Grid, and other associated transmission lines has severely affected Pakistan’s power system.”
The regulator added that since majority of DISCOs operate under the public sector and remain owned by the federal government, even after more than two decades of incorporation as companies, they had largely failed to function as true corporate entities.
“It remains unclear whether these DISCOs themselves are unwilling to operate independently or whether their owners are reluctant to promote them as such. However, it has been observed that they are increasingly being brought under centralised control previously under PEPCO [Pakistan Electric Power Company] and now under Power Planning and Monitoring Company (PPMC). The Boards of Directors (BoDs) show little interest in improving the financial health of these companies or transforming them into organizations of international standard. Furthermore, there is a lack of accountability for BoD members, Chief Executive Officers, and other officers and officials. This absence of deterrence has emboldened these entities to maintain the status quo, perpetuating inefficiencies and poor performance across the sector.”
On the data side, average transmission and distribution (T&D) loss (electricity lost in transit and due to theft) stood at 17.4% in the reported period, down from 18.31% in the previous year. However, in both years, all entities were below the NEPRA-allowed benchmark of 11.43% in FY25, and 11.77% in FY24.
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At the same time, recoveries (the other aspect of commercial losses) on the part of DISCOs were down Rs132.5 billion, while KE alone failed to recover Rs74.6 billion. However, NEPRA noted that KE absorbs the financial impact of its losses being a private entity. Hence, the regulator argued that privatisation of Islamabad Electric Supply Company (IESCO), Gujranwala Electric Power Company (GEPCO), and Faisalabad Electric Supply Company (FESCO) represented a necessary corrective step.
“Governance remains the most critical challenge confronting Pakistan’s DISCOs. KE, PESCO [Peshawar Electric Supply Company], HESCO [Hyderabad Electric Supply Company], SEPCO [Sukkur Electric Power Company], and QESCO [Quetta Electric Supply Company] are the poorest performers, with T&D losses far exceeding NEPRA limits, low revenue recovery, excessive AT&C losses, prolonged load-shedding, mounting receivables, poor service quality, and high consumer dissatisfaction. Their performance is weak across nearly all operational and financial indicators,” the NEPRA report said.
KE recorded actual losses of 14.74% against an allowed 14.58%, while FESCO missed its benchmark by only 0.64%.
In contrast, PESCO, QESCO, SEPCO, and HESCO continued to record the widest deviations from allowed targets, with PESCO alone causing a fiscal cost of Rs87.5 billion.
QESCO and SEPCO contributed a loss of Rs52.4 billion and Rs36.0 billion, respectively. Lahore Electric Supply Company (LESCO), despite some improvement from FY24, still recorded actual losses of 13.70% versus an allowed 9.46%, resulting in a Rs35.2 billion fiscal impact.
In terms of recovery, Multan Electric Power Company (MEPCO) was the best-placed DISCO with a recovery rate of 101.7%, followed by GEPCO and LESCO.
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