Power division to consult stakeholders on ToU pricing model aimed at efficiency, cost reduction
To cover losses, successive governments have increased electricity prices and imposed a Rs3.23 per unit surcharge to service debts taken for power distribution companies, pushing energy prices to the highest levels in the region. Photo: file
The government is considering introducing an optional multi-tariff Time-of-Use (ToU) mechanism for industrial consumers to improve efficiency and rationalise electricity pricing, the Power Division said on Wednesday.
The proposal, initiated under the direction of Federal Minister for Power Sardar Awais Ahmed Khan Leghari, has been discussed in several internal consultative and technical meetings.
Under the proposed framework, industrial consumers will have the option to adopt a multi-slab tariff structure, where electricity prices are linked to average marginal costs across different time-of-use periods.
The tariff will comprise two key components. Fixed charges, based on Maximum Demand Indicators (MDI), are expected to be relatively higher to encourage industries to optimise and reduce peak demand. Variable energy charges, on the other hand, will be rationalised and aligned more closely with actual energy costs.
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According to the Power Division, the mechanism aims to encourage efficient load management by allowing industries to shift operations to lower-cost periods, while also promoting electricity consumption during off-peak hours to improve system load factor.
The proposal is also expected to incentivise peak demand reduction, easing pressure on the national grid and minimising the need for expensive capacity additions. The new structure could support industrial productivity and competitiveness by offering more predictable and potentially lower energy costs, while contributing to sustainable economic growth.
Following the development of technical proposals, the minister has directed authorities to ensure inclusivity and effectiveness through extensive stakeholder consultations. In this regard, consultations will be held with industrial consumers, chambers of commerce and trade bodies across the country, with feedback to be incorporated into the final mechanism.
The first consultative conference is scheduled to be held online on March 26.
Earlier, Prime Minister Shehbaz Sharif said the ongoing regional war had severely disrupted global economic stability, driving oil prices to historic highs and triggering a fresh wave of inflation that has strained household finances. He noted that attacks on energy infrastructure in Gulf states had further worsened the situation, raising fears of a prolonged crisis.
In response, the government adopted austerity measures, including budgetary cuts and reduced development spending, to absorb the financial impact of rising fuel costs. The premier said the state had so far borne a significant burden to shield citizens from sharp price hikes, while also working on a targeted mechanism to ensure relief reaches only the most deserving segments of society.
