Article

State of power industry report is an indictment of the system operators

Written by The Frontier Post

Khaleeq Nazar Kiani

Pakistan’s energy sector is in total chaos, with strong claws of bureaucracy and myopic political leadership leading it towards bankruptcy. The efficiency and quality of service delivery are very low and discontent between the public and Government is now evident. Except in Ka-rachi, the power sector is mainly run by the Gov-ernment and the general public as the consumer is bearing the cost of the mismanaged system.
Two days back, NEPRA unveiled the State of Industry Report 2022 which was an indictment of the system operators and also a question mark on the monitoring role of the regulator. The protection of public interest should be the main function of the regulator but it has been observed that NEPRA always tried to side with the Government. The allegations of over-invoicing while determining the tariff and lenient attitude towards wrongdoings of Government system operators make the credibility of the regulator very weak.
As per the report, Pakistan’s per capita annual electricity consumption of 644 kWh is among the lowest in the world, which is only 18% of the world average reflecting the living standards of the people in the country. Under the constitution, electricity is the basic right of every citizen but very few know that Baluchistan’s two-thirds population is without electricity and apparently, Government has no plan to electrify those areas in the near future.
During the period, 4,498 MW was added to the system and now the total installed generation capacity is 43,775 MW. The peak demand of 28,253 MW was witnessed in June 2022 while in December 2022; the peak demand was down to 15,962 MW. The consumers are paying high tariffs due to capacity payments because the installed capacity with ‘Take or Pay’ and must-run power plants is 40,813 MW. There is a gap between take or pay installed power generation capacity and demand which resulted in 721 billion cap-acity payments and 1.17 bi-llion NPMV in FY 2022. T-he consumers paid Rs.1-9332 million due to violation of merit order and Rs. 3670 million for system constraints.
NEPRA acknowledge that it fails to get implement its direction from CCPA-G to carry out financial and technical audit while procuring the electricity on behalf of the DISCOs. The operation of efficient power plants on part load took Rs. 41.7 billion from the pocket of the public. To run the combined cycle of power plants in an open cycle caused 55 billion losses. The general public is still paying the capacity payments of hydel power plants even after 30 years of their operation.
In FY 2022, the performance of the transmission system was also on the decline and underutilized. The T&D losses were Rs. 72 billion. The HVDC line was underutilized and 49 billion was paid on capacity payments.
The distribution segment remained the poor performer in the power sector. The T&D losses of DIS-COs were much higher than the target and incurred Rs. 113 billion shortfalls. In FY 2022, the receivable touch-ed Rs. 230 billion figures and the result is circular d-ebt. Discos frequently reso-rt to forced load shedding to avoid costlier generation which is a bad practice. Despite the availability of ample power generation capacity 501,843 applications for electricity connection were pending. Govern-ment is the big defaulter of DISCOs and Rs. 83,399 million is outstanding on a-ccount of the subsidies ag-ainst it. The serving and ret-ired employees of DISCOs, GENCOs, NTDC, and WAPDA Hydro enjoy free electricity of Rs. 6.4 billion annually. NEPRA recommended the removing of other taxation/fees (TV) from the electricity bill.
The report praised the net metering phenomenon as it is in the interest of the power sector and needs to be encouraged. The net metering consumers generated and exported 150.67 MWh and avoided the costlier power plants generation of 30/kWh. It also improved the voltage in respective areas and helped in the reduction of T&D losses plus transformer overloading. But on the other hand, NEPRA proposed the amendment to net metering Regulations to reduce the incentives which will ultimately discourage investment in distributed generation.
No doubt energy is the most important input in economic development. It derives economic development and industrial growth. Pakistan needs sustainable and affordable energy which at present seems to be a dream. The system is corrupt, inefficient, and not delivering. It needs major surgery/reforms.

About the author

The Frontier Post