Pakistan is facing its second imported energy crisis in less than five years. According to Arif Habib Limited (AHL), a brokerage, the average cost of generating a unit of electricity reached Rs10.01 per kWh in August 2026, 38% higher than the Rs7.27 recorded a year earlier. AHL attributes the increase to a greater reliance on regasified liquefied natural gas (RLNG) and furnace oil, together with high oil prices. Distribution companies (DISCOs) have asked for a fuel-cost adjustment of Rs1.73 per kWh for the month, which would be passed on to consumers.
The cause lies abroad. Early in 2026, war broke out around Iran and disrupted shipping through the Strait of Hormuz, which carries about a fifth of the world’s oil and gas. In some markets, gas prices more than doubled in a single day. Pakistan has had to arrange additional emergency fuel shipments this summer, much as it did in 2022.
Electricity demand, by contrast, is rising. Generation reached 14,943 GWh in August, up 5.1% from 14,218 GWh a year earlier, although still below the August 2021 peak of 16,176 GWh. Output was 1% lower than in July. AHL says generation exceeded the regulator’s reference level, helped by lower tariffs, industrial users returning to the grid, discounted tariffs for additional consumption by factories and farms, and a 3% year-on-year increase in large-scale manufacturing in July.
Hydropower helped to limit the increase in costs. Hydel plants produced 5,654 GWh in August, 2.5% more than a year earlier and 17% above the long-term August average of 4,846 GWh. This was the second-highest August output on record and accounted for 38% of generation. Monthly generation costs fell by 7% from July’s Rs10.75 per kWh.
Coal accounted for 27% of generation, followed by nuclear at 10%, gas at 9%, RLNG at 7%, wind at 6% and solar at 1%. Coal-fired output reached 3,956 GWh, up 53% and the highest for any August. The increase came mainly from imported coal, whose output more than doubled to 2,330 GWh, while generation from local coal rose by 13% to 1,626 GWh. AHL attributes the shift to coal to scarce and expensive LNG.
The rapid increase in imported coal sits uneasily with the government’s account of its progress. According to an account of the Power Division’s work since 2024, hydropower, solar and local coal from the Thar desert now provide about 75% of Pakistan’s electricity, which shielded much of the system from the latest shock. Yet the same account acknowledges that a large share of the coal-fired fleet was built to burn imported fuel and remains exposed to the problems the rest of the system has begun to escape.
The Thar coalfield is central to the government’s plans. Documents seen by Wealth Pakistan show that six plants with a combined capacity of 3,960MW burned 13.83m tonnes of Thar coal in 2025-26 and produced 16,446.5 GWh. Four plants, totalling 2,640MW, run entirely on Thar coal and supplied 15,793 GWh. The largest is the 1,320MW Thar Coal Block-I plant, which generated 8,331 GWh, followed by Engro Powergen Thar at 3,817 GWh and Thar Energy and ThalNova at about 1,820 GWh each.
Efforts to convert plants that run on imported coal are under way. The 660MW Lucky Electric plant at Port Qasim used a 33% share of Thar coal last year, and since September 1st it has received regular supplies from Sindh Engro Coal Mining Company to run at base load. The 660MW Jamshoro plant began testing a mix of 80% imported and 20% Thar coal in June. Officials say feasibility studies for a full conversion are encouraging, although moving coal by rail from the mines remains unresolved.
The pressure on consumers has been building for years. In 2013 a unit of electricity cost about Rs9.6, rising to around Rs11 by 2019. The rupee then lost value rapidly, falling from an average of about 178 to the dollar in FY22 to more than 300 at one point in 2023. Russia’s invasion of Ukraine pushed LNG prices towards $70 per unit and left Pakistan unable to secure contracted cargoes. By 2024 the average tariff had reached almost Rs25, the highest in the country’s history.
The Power Division has had some success with problems within its control. Annual losses at distribution companies, caused by theft, unpaid bills and old wiring, have fallen from about Rs591bn in FY24 to roughly Rs397bn the following year and around Rs326bn this year. Management appointments based on merit and stricter billing enforcement helped to achieve the reduction.
Pakistanis have also responded to high prices themselves. Distributed solar capacity has grown to nearly 38,000MW, and 54,000MW of panels have been imported. However, the grid’s fixed costs remain, so they must now be paid by fewer customers. New net-billing rules for prosumers have only partly addressed the problem. To encourage more grid use, the tariff for electric-vehicle charging stations has been cut from about Rs71 to Rs39.70 per unit, and battery storage is being promoted to store surplus solar power for the evening peak.
Some observers argue that the government also needs to assess its own role more rigorously. One commentator note that DISCOs are required to fund bodies such as PITC and PPandMC, which monitor sector performance. Because regulated companies can recover such costs through tariffs, ministry oversight may end up being paid for by electricity consumers. Funding arrangements of this kind also raise questions about the independence of evaluations.
The same commentator points to examples from other countries. India’s Development Monitoring and Evaluation Office, part of NITI Aayog, has its own budget and functional autonomy. Britain’s Evaluation Task Force makes the department responsible for a policy also responsible for evaluating it, and the Treasury’s Magenta Book requires evaluation costs to be included in business cases from the start. Pakistan’s Public Finance Management Act of 2019 already links spending to measurable results, but the commentator argues that ministry-level policy reviews should be funded from government budgets rather than charged to the companies being assessed.
The broader question, he argues, is who evaluates the ministry’s own decisions on tariffs, subsidies and investment, which also affect the performance of distribution companies. The answer matters because important problems remain unresolved: the fixed-cost burden created by the solar boom, the unfinished conversion to Thar coal and a rising subsidy bill. The war in the Gulf will show whether the progress of the past two years can withstand this new shock.