Rooftop Solar Rules & Tariffs Turbulence Rock Pakistan Power Sector

Pakistan’s electricity sector has entered a critical juncture as regulators, policymakers, and consumers grapple with fundamental changes to rooftop solar policies and electricity tariffs. The reforms aimed at stabilizing the financially beleaguered system could trigger significant political and economic repercussions.

At the heart of this transformation is NEPRA’s decision to transition from Pakistan’s decade-old net metering model to a new “net billing” framework under the Prosumer Regulations 2026. Under the old regime, rooftop solar users were able to offset exported electricity at nearly parity with grid-sourced power. This one-to-one adjustment made solar installations highly attractive and accelerated urban adoption across Pakistan; more than 466,000 consumers had signed up by then.

However, the new rules fundamentally alter this landscape. Solar surplus will now be bought at a fixed price of Rs 10-11 per unit from NEPRA, while electricity purchases remain at prevailing tariffs ranging from Rs 37 to Rs 55 per unit, depending on consumption slabs. Contract terms have been shortened from seven years to five, and system capacity is capped at sanctioned loads.

Concurrently, NEPRA approved an additional Rs 132 billion in new fixed charges for over 28 million residential consumers, effective retroactively since February. These now range between Rs 200 and Rs 675 per kilowatt of sanctioned load, significantly pushing up average tariffs, especially for lower and middle-income groups. In some instances, these increases can be as high as 75 percent.

The government contends that these changes are necessary to address structural imbalances in the power system. Solar’s rapid adoption led to higher-paying consumers reducing their grid consumption, shrinking the revenue base from which distribution companies (DISCOs) recover fixed costs, including billions in capacity payments owed to independent power producers (IPPs). These payments must be made regardless of actual electricity generation.

This backlash was swift. Lawmakers across all parties criticized the solar overhaul, prompting Prime Minister Shehbaz Sharif to intervene. In a high-level meeting, he directed the Power Division to file a review petition with NEPRA to safeguard existing solar consumer contracts. He emphasized that shifting the burden from 466,000 solar users onto 37.6 million grid consumers would not be acceptable.

The political sensitivity of this situation cannot be overstated. The statement signals concern over public reaction but raises a complex economic quandary: if current solar users are shielded from lower buyback rates, industrial tariffs are reduced to boost exports, and subsidies are simultaneously being cut under fiscal constraints, then who will shoulder the system’s full fixed costs? This burden could fall on three entities—solar users, other grid consumers, or the state through higher subsidies.

Pakistan’s ongoing IMF programme complicates this scenario. The IMF has already reduced power subsidies by Rs 143 billion and set a strict target to cap circular debt accumulation at Rs 400 billion for the current year. Under these conditions, cost-reflective tariffs, reduced cross-subsidies, and improved recovery performance align with IMF objectives. However, fully insulating existing solar users without offsetting adjustments could complicate revenue recovery targets.

This debate extends beyond mere solar incentives; it concerns how to redesign tariffs and grid economics for an energy transition in progress while balancing fiscal discipline, consumer protection, and system solvency. The current context places the spotlight on whether reforms result in minor tweaks or broader restructuring. Either way, the critical reality remains: someone must ultimately bear the full cost of Pakistan’s power system.

The underlying challenge is structural; the country’s electricity system was conceived around centralized generation with heavy fixed capacity payments. Rapid solar decentralization reduces energy purchases but does not eliminate systemic fixed costs entirely.

This current debate therefore transcends merely solar incentives and delves into how to redesign tariffs and grid economics for a transitioning energy landscape, reconciling fiscal prudence, consumer safeguards, and system solvency. Whether the reviewed reforms lead to minor adjustments or broader reform underscores the need for transparency in distributing such burdens equitably.