Govt announces optional multi-tariff time of use mechanism for industrial consumers

ISLAMABAD: The government on Wednesday announced that it was introducing an optional multi-tariff time of use (ToU) mechanism for industrial consumers for optimal utilisation of grid supply through pricing signals.

“The Power Division is considering introduction of a new optional tariff mechanism aimed at facilitating industrial consumers and enhancing overall efficiency in electricity utilisation,” an official statement said.

The division said that several internal consultative and technical meetings had already been undertaken by Power Minister Sardar Awais Khan Leghari in this regard.

Under this proposed framework, industrial consumers will have the flexibility to opt into a multi-slab tariff structure, where energy pricing is based on average marginal cost signals across defined time-of-use slabs. This approach is designed to better reflect the actual cost of electricity supply during different periods.

The tariff will consist of two primary components that include fixed charges and variable energy charges in line with existing tariff structure.

Fixed charges will be determined based on Maximum Demand Indicators (MDI) and are expected to be relatively higher. This will incentivise consumers to optimise and reduce their peak demand.

Variable energy charges will be significantly rationalised and aligned closer to actual energy costs, enabling more cost-reflective pricing.

This structure is expected to encourage efficient load management by allowing industries to align their operations with lower-cost time periods.

This is also expected to promote higher electricity consumption during off-peak hours, improving system load factor.

The new mechanism is designed to incentivise peak demand reduction, thereby reducing stress on the grid and minimising the need for costly capacity additions and support industrial productivity and competitiveness through more predictable and potentially lower energy costs.

“Overall, this tariff reform is expected to act as a catalyst for sustainable industrial growth in Pakistan, improving energy efficiency while supporting long-term economic development,” the power division said.

It added that the power minister, after technical proposals, had now issued directions to ensure inclusivity and effectiveness for the proposed regime through extensive stakeholder consultations.

In this regard, stakeholder consultations will be conducted with industrial consumers, chambers of commerce, and trade bodies across the country. Feedback from these engagements will be incorporated to refine the mechanism.

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