The government has decided to supply local gas to RLNG-based power plants at Rs2,000 per MMBtu during the current LNG shortage triggered by the US-Iran conflict, instead of the Rs3,500 per MMBtu import rate or the Rs1,245 per MMBtu domestic rate. A summary has been prepared for formal approval, an official of the Power Division said during a NEPRA public hearing on Tuesday.
Context of the Decision
The official was responding to concerns raised by participants in the hearing. An industry representative expressed frustration, stating that the LNG suspension was initially presented as an opportunity for local gas production to increase and benefit RLNG-based power plants. “We were told it was a blessing in disguise,” they said, expecting RLNG-based electricity tariffs to drop with cheaper local gas supply. However, they are now facing a legal hurdle, with local gas likely to be priced at LNG rates, negating the expected benefits.
Pricing Mechanism
The official clarified that RLNG-based power plants will not be charged the full LNG price of Rs3,500 per MMBtu for the supply of local gas. These plants had been receiving imported gas at Rs3,500 per MMBtu. But with Qatar suspending LNG supplies to Pakistan following the US-Iran war, gas supplies to these plants have been suspended. To meet energy demand at a reasonable cost, the government has started supplying local gas to the RLNG plants. It was earlier assumed that local gas would be provided at RLNG rates of Rs3,500 per MMBtu, but the official denied this.
Balancing Circular Debt and Consumer Tariffs
The official said Sui companies are currently selling gas at up to Rs3,500 per MMBtu, while gas-based power plants are being charged Rs1,245 per MMBtu. Supplying indigenous gas at Rs1,245 per MMBtu to RLNG-based power plants would widen the gas sector’s circular debt. At the same time, charging the full Rs3,500 per MMBtu would raise electricity tariffs for consumers. To balance both concerns, the government has settled on a middle rate of Rs2,000 per MMBtu for local gas to RLNG plants. The aim is to protect Sui companies from revenue losses while shielding power consumers from higher tariffs, the official added.
