Solar Net Metering Rates to Drop with New Reforms
The reduction in solar net metering rates is part of a broader effort to restructure the power sector, which includes plans to rationalize power tariffs, decommission inefficient plants, and renegotiate tariffs with IPPs. The government aims to provide affordable electricity to consumers and improve sector efficiency and governance, while also eliminating circular debt and promoting transparency and fairness in negotiations with IPPs.
The government plans to lower solar net metering rates from Rs27 to Rs10 per unit, as part of broader efforts to restructure the power sector and address concerns from the International Monetary Fund (IMF) about the rapid rise in solar installations.
The proposal to reduce solar net metering rates aims to avoid burdening other consumers and ensure transparency and fairness in negotiations with independent power producers (IPPs). Federal Energy Minister Awais Leghari announced plans to "rationalize net metering" and emphasized that IPPs have the option to avoid talks or choose arbitration and forensic audits. The government has also outlined plans to rationalize power tariffs, including decommissioning inefficient plants and renegotiating tariffs with IPPs.
The government has secured significant savings through negotiations with IPPs, including Rs1.571 trillion in future payment savings. The minister also informed lenders that the government would soon rationalize solar net metering and offer cheaper electricity to select consumers for incremental consumption at marginal cost to boost faltering demand. The government aims to eliminate circular debt within the next five to eight years and is working on reforms to improve the power sector's efficiency and discipline.
The reforms in the power sector aim to provide affordable electricity to consumers, especially industries, and improve sector efficiency and governance. The government has assured major international lenders that negotiations with IPPs are free, fair, and transparent, and that IPPs unwilling to renegotiate contracts can opt for either a forensic audit or international arbitration.
