The Utility Death Spiral: Why Your Grid Bill Keeps Rising as Others Go Solar

• By Best Solar Company PK
• 21 Jul, 2026
• Solar Policy
• 8 min read

Open your electricity bill and you will notice something that feels deeply unfair: the per-unit rate keeps climbing even in months you used less. Part of the reason is not your consumption at all. It is the growing bill left behind by neighbours who have already gone solar — a cost that Pakistan's regulators now openly admit is being redistributed onto everyone still fully connected to the grid.

By December 2024, the government estimated that net-metered solar consumers had shifted a burden of roughly **PKR 159 billion** (about USD 563 million) onto the remaining grid consumers. Left unchecked, official projections warned this could balloon to **PKR 4.24 trillion by 2034**. This is not a fringe theory. It is the stated rationale behind the sweeping net-metering overhaul that landed in 2025 and 2026.

Economists have a name for this feedback loop: the **utility death spiral**.

What the death spiral actually is

Your electricity bill pays for two very different things. The first is the energy you consume — the actual units. The second, and increasingly the larger share, is **fixed cost**: power plants built and paid for whether they run or not (capacity payments), transmission lines, distribution networks, and the mountain of circular debt the sector carries.

Those fixed costs do not shrink when a household goes solar. They just get divided among fewer paying units. Here is the mechanics of the spiral:

• A high-consumption home installs rooftop solar and slashes what it draws from the grid.
• The grid's fixed costs stay the same, but there are now fewer billed units to spread them over.
• To recover those costs, the per-unit tariff must rise for everyone left.
• Higher tariffs make solar even more attractive for the next high-bill household — so it too defects.
• Repeat.

Crucially, the homes that go solar first are the affluent ones — big houses, air conditioners, sanctioned loads above 5 kW. These were the grid's most profitable customers, sitting in the highest tariff slabs (up to roughly **PKR 47–48 per unit** for unprotected domestic consumers). When they largely exit, the cross-subsidy they used to provide to protected, low-usage households collapses. The burden lands hardest on people who can least afford a solar system of their own.

Why Pakistan's grid is so fragile to this

Pakistan is unusually exposed because of **capacity payments**. Over the past decade the country signed contracts obliging it to pay independent power producers for availability, regardless of how much electricity is actually dispatched. Add the sector's chronic **circular debt**, IMF-driven cost-recovery targets, currency depreciation, and fuel costs, and you get a tariff that only knows one direction.

Consider what a 2026 bill already stacks up:

• A base tariff averaging around **PKR 31.59 per unit** for FY 2025–26.
• Domestic slabs ranging from roughly **PKR 22 to PKR 47 per unit**.
• A financing-cost surcharge for circular debt built into the per-unit charge.
• An additional surcharge of about **PKR 3.82 per unit** approved for March–June 2026.

None of these are linked to your solar decision. They are structural — which is exactly why the regulator reached for the solar policy lever instead.

What NEPRA changed — and what it means for timing

In response to the cost-shift, the **NEPRA (Prosumer) Regulations, 2026** moved new rooftop solar consumers off classic net metering and onto **net billing**. If you apply for a solar connection after **9 February 2026**, you fall entirely under the new regime:

• **Exported units** (the surplus you send to the grid) are bought at roughly the national average energy price — around **PKR 11 per unit** — down from the old fixed buyback of about **PKR 27**.
• **Imported units** (what you draw at night or on cloudy days) are still billed at full retail peak/off-peak rates, which can run **PKR 37–55 per unit** with taxes and surcharges.
• Agreements are now capped at **five years**, renewable for another five, instead of the earlier longer-term certainty.

This is the critical point for anyone still on the fence. The old, generous unit-for-unit exchange has already been withdrawn for new applicants. But the regulations **protect existing consumers**: those with a valid net-metering agreement signed under the earlier framework keep their terms until that agreement expires. Whenever the government tightens the rules further — and the trajectory is clearly one-directional — it grandfathers those already in the system and applies the harsher math to newcomers.

Why sooner genuinely beats later

Put the two forces side by side and the timing logic becomes hard to ignore.

**If you wait:**

• Grid tariffs keep climbing as the death spiral advances — you pay more per unit every year you delay.
• Each policy revision has cut the value of solar for new entrants (net metering → net billing, PKR 27 → PKR 11 buyback). There is no evidence the next revision will be kinder.
• You spend those years financing, through your own rising bill, the exit of everyone who solarised before you.

**If you go now:**

• You lock in today's rules and today's system economics before the next tightening.
• Panel prices have fallen dramatically, so hardware has rarely been cheaper — the payback maths on self-consumption is still strong even at PKR 11 export rates, because avoiding a PKR 40+ import unit is worth far more than exporting one.
• The smart 2026 design is a **self-consumption-first** system: size it to run your own load during daylight, add batteries where it pays, and treat exports as a bonus rather than the business case.

The death spiral is uncomfortable to talk about because it pits neighbour against neighbour. But as an individual homeowner or business, you do not control national tariff policy — you only control whether you are inside the system that is getting cheaper for you, or outside it and paying for those who left. For a deeper look at running the numbers under the new rules, see our guide to net billing vs net metering in 2026.

Frequently Asked Questions

**Is the PKR 159 billion figure real, or solar-industry spin?** It comes from the government's own Power Division, cited when the Economic Coordination Committee approved amendments to net-metering rules. As of December 2024, net-metered consumers were assessed to have shifted about PKR 159 billion onto other grid consumers, with projections of PKR 4.24 trillion by 2034 if unamended. The industry disputes the methodology, but the number is an official one.

**If I install solar now, will the government later force me onto worse terms?** Existing consumers with a valid agreement are protected until that agreement expires under the current rules. New applicants after 9 February 2026 already fall under net billing. Getting a valid agreement in place sooner is precisely how you secure grandfathered protection.

**Does net billing at PKR 11 make solar pointless?** No. The export rate matters far less than most people assume. The real saving is avoiding grid imports priced at PKR 37–55 per unit. A system sized for daytime self-consumption still delivers strong returns — the key is using your own solar rather than exporting it cheaply.

**Should I add batteries?** Increasingly, yes. With exports now valued at around PKR 11 and imports at PKR 40+, storing daytime surplus to use at night is worth far more than selling it. Batteries also shield you from the surcharges and the ongoing tariff climb driven by the spiral itself.

**Will grid electricity ever get cheaper?** Structural costs — capacity payments, circular debt, and IMF cost-recovery targets — all push tariffs upward, and the death spiral adds to that pressure. Planning around continued increases is the prudent assumption for any Pakistani household or business today.

Best Solar Company PK designs and installs reliable solar systems in Rawalpindi, Islamabad, Lahore, Multan, Taunsa Sharif and Karachi. Contact us for a free survey and the best advice for your home or business.