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| Power generation declines due to high cost of oil |
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Thursday, August 28, 2008
By Mansoor Ahmad
LAHORE
MANY power sector experts attribute the alarming rise in outages to either incompetence of power authorities or a deliberate attempt by them to produce less electricity in view of high oil rates.
They have a point as according to WAPDA’s own data, the total installed electricity generation capacity in the country, besides around 350 MW nuclear power plants, is 17,724 MW. The net production after accounting for operational or capacity loses is 16,008 MW.
The electricity produced a day earlier was 11,678 MW. The shortage, according to Pakistan Electric Powewr Company sources, was 4,500 MW on Tuesday. This shortfall could have been reduced substantially had the electricity generating units produced electricity according to their rated capacity.
The Pakistan Electric Powewr Company, for instance, has 10 thermal units with an installed capacity of 4,664 MW. The maximum Pakistan Electric Powewr Company could produce from these units, after accounting for wear and tear, is 3,570 MW.
The Pakistan Electric Powewr Company, however, is producing only 2,000 MW from its thermal units.
There is no official explanation for this huge reduction in thermal electricity production by the Pakistan Electric Powewr Company.
The News found that the reduction in power generation is not due to any major fault in thermal units. It is either due to the inefficiency of the entity or due to short supply of fuel. Most of the thermal units of the Pakistan Electric Powewr Company and IPPs could be operated with either natural gas or furnace oil. Some of the thermal units of the Water and Power Development Authority could be run on natural gas or on diesel.
The generation cost of electricity produced by furnace oil or diesel is very high. In fact, electricity produced by using diesel costs over Rs 25 per unit. For furnace oil, the cost is Rs15 per unit while gas costs much less.
The Pakistan Electric Powewr Company does not get additional tariff from electricity produced from high cost oil. It seems that the Pakistan Electric Powewr Company has adopted a policy of producing less electricity than its capacity in order to save the additional cost that could not be recovered from consumers. This is creating power shortages.
The same principal of low electricity production applies to independent power producers. The thermal generation by IPPs on Tuesday was 4,078 MW - 1,596 MW less than their current electricity production capacity. This was because the gas to main IPPs located in Punjab was cut off due to a gas pipeline explosion.
These IPPs could have easily shifted to furnace oil. The Pakistan Electric Powewr Company bears the cost of additional amount used in the fuel consume by IPPs if they have to revert from gas to furnace oil.
It is mandatory for the IPPs to stock 21 days of fuel in case they have to shift from gas to furnace oil. ,But they did not do so either because they lack furnace oil stocks or the Pakistan Electric Powewr Company did not give them the go ahead to shift to oil generation. Again the issue must have been the high cost of electricity production that could not be recovered from consumers.
Experts point out that this brings into question the role of the regulator. They said after fixing power tariff, the NEPRA as a regulator should ensure smooth supplies to consumers. They sympathise with the Pakistan Electric Powewr Company that is made a scapegoat by the government. They said that Pakistan Electric Powewr Company is not making payments to oil companies and IPPs because it was not receiving billions of rupees from the KESC and Federal Administred Tribal Areas.
In case of Federal Administred Tribal Areas, the Pakistan Electric Powewr Company adds Rs 12 billion annually as receivable, the net receivables increase to over Rs 40 billion. The KESC owes Pakistan Electric Powewr Company over Rs 20 billion. The government does not allow Pakistan Electric Powewr Company to cut supplies to these two regions on defaulting.
The government itself is not compensating the Pakistan Electric Powewr Company for these losses. The News found that the Pakistan Electric Powewr Company would continue with the current practice of reducing high cost electricity production and increase load shedding until it has enough resources to pay for high oil cost. The next increase in power tariff is on cards that might generate some resources for Pakistan Electric Powewr Company to increase high cost of oil-based electricity generation.
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ISSN 1563-9479 
