Strategic Energy Reallocation: A Policy Driven Tariff Structure for Managing Domestic Electricity Demand in Pakistan /

Abstract

This paper presents a novel tariff structure designed to manage domestic elec tricity demand through demand-side management strategies, reallocating the resulting savings to the industrial sector to enhance productivity and stimulate economic growth in Pakistan. In the fiscal year 2022-23, domestic and industrial sectors consumed 43% and 24% of the total generated electricity, respectively, with industrial consumption playing a crucial role in GDP contribution. This research focuses on decreasing do mestic energy consumption and reallocating the conserved electricity to the industrial sector, thereby boosting economic performance. Current tariffs do not account for in come disparities and inadequately address price elasticity, leading to inefficient energy distribution. The proposed tariff structure aims to optimize electricity consumption among users while fulfilling the essential needs of domestic consumers. Utilizing datasets from local billing, the PRECON dataset, regulatory notifica tions from NEPRA, and a newly compiled representative dataset, the study bases its tariff recommendations on consumer income and demand elasticity. The study em phasises the need to allocate energy resources to the industrial sector for economic growth, as well as the industry’s substantial contribution to Pakistan’s GDP. The proposed tariff structure endeavours to curtail consumer demand while up holding a minimum critical consumption threshold derived from PRECON data anal ysis. Linear regression analysis indicates a potential 3.15% reduction (1,000.89 GWh) in national electricity demand, with a 1.25% decrease observed in the representative dataset of 4,765 consumers. A potential increase in consumption was observed in the 101-200 slab due to shifts in consumer behavioural trends supported by historical data analysis. The findings suggest that the proposed tariff can reduce residential electricity demand in Pakistan by 1-3%, facilitating greater electricity availability for industries and promoting economic growth and industrial productivity.