ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) has expressed concern and annoyance over the National Accountability Bureau (NAB) questioning power tariff determinations what the regulator had made in last several years and added that it discouraging the professionals to take decisions.
“Almost all the projects on which Nepra had made determinations in the past have been questioned by NAB, and the way the investigations are being conducted, it has completely stifled the morale of Nepra professionals,” the regulator said in its report titled ‘state of industry report 2018’ that it released on Thursday.
It further says, “The matter in essence has come to the jurisdiction of Nepra and the boundaries beyond which NAB may not intervene. A holistic approach is the need of the hour so that confidence of the sector in general and that of Nepra in particular is not unduly hurt.”
The power regulator also said that it has decided not to renew the licences of the public sector power generation companies (Gencos) having worst efficiency levels. Gencos have inferior power generation efficiencies and adding costly energy to the grid.
Import of power from Central Asian States (CASA project) is not expected to lower the cost of energy mix while its energy supply may not be attractive for the system due to seasonality in the availability of power.
The project requires NTDC to construct 100km Transmission Line from the Pak-Afghan Boarder to Peshawar and a 1,300MW convertor station at Peshawar. Roughly, the present tariff will be Rupees 15/kWh, which will increase after the addition of transmission and distribution losses for the end-consumer. Therefore, the regulator observes that this will not be a cheap solution, as it will not help lower the overall energy mix cost of the country. Further, it may also be noted that the energy will not be available during the winter when there is acute shortage of fuel and hydro energy in the country is also at the minimum level.
The federal government may consider revisiting the agreements in view of the higher tariffs and other requirements for constructing transmission network.
It also pinpointed that the ex-Wapda Discos could not reduce their overall T&D losses, as the results over past five years show that their losses increased in the FY 2017-18 relative to the earlier years. Similar performance has been noted in the area of overall revenue recovery of Discos. The recovery ratio in FY 2017-18 has deteriorated compared to previous years.
Circular debt continued to accumulate to around Rs1,000 billion due to inefficiencies of Gencos, Discos’ inability to achieve targets for T&D losses and recovery ratios as allowed by Nepra and other governance issues like delay in tariff notification. Continuation of centralised control of Discos and public sector Gencos has been noted as one of the main reasons, for not only the substandard performance of these entities, but also a major factor for accumulation of the Circular debt.
The regulator said that the government is exploring the option of privatisation of XW-Discos to encourage private investment, making them financially self-sufficient which will reduce the burden on national exchequer.
Besides other ex-Wapda Discos, governance issues have been noted in the performance of K-Electric. KEL failed to anticipate about impending gas depletion and to take any remedial measures in the absence of long-term gas supply agreement with SSGC.
Inconsistent data reporting and quality issues of information by XW-Discos, NTDC and K-Electric have been noted in the important areas of their power supply and demand projections.
The Transmission Sector (NTDC system) has shown improvements to a certain extent as constraints specific to different areas have been removed, notably around Khyber Pakhtunkhwa and 500kV links for Port Qasim Coal Power Plant. However, constraints for evacuation of wind energy from Jhampir corridor continued to be experienced. Similarly, power production from newly constructed Guddu Power Plant has to be curtailed due to transmission constraints.
The regulator said that “Right of way” Issues and “Stay Orders” by courts have been noted for delays in timely completion of transmission line projects. So, in order to address litigation and “right of way” issues, special energy courts may be introduced in the country, it recommended to the government.
In the absence of National Electricity Policy and Plan and the Rules to be framed by the federal government, pursuant to Nepra Amendment Act, 2018, clear goals for the sector are not available for the stakeholders to move forward. Similarly, transition from the existing regulatory regime to the competitive market may not be completed without National Electricity Policy and Plan and supporting Rules and Guidelines.
For the past couple of years, the central power purchasing agency (CPPA) stance has been noted to be inconsistent with the long term vision and stated policies of the Federal Government. The positions of provincial bodies and CPPA-G have also been quite opposite to each other. The state of affairs, especially, for the renewable energy based projects have created a chaos in the sector. Due to such inconsistent policies, more than 1,850MW of renewable energy based applications are pending with Nepra for final determinations. CPPA-G is treading a tight rope, as its conduct would lead to irreparable damage to the power sector over the long run.
For the development of a market model, CPPA appeared to have ignored the ground realities and readiness of stakeholders and need for enabling environment.
It further said that K-Electric has significantly reduced its T&D losses as compared to Discos. Prior to 2009, KE’s T&D losses of 35.9pc were on a par with Hesco and Sepcos T&D losses. The report further says that through a combination of loss reduction projects and initiatives such as use of Aerial Bundled Cable (ABC), KE has mitigated these losses by 15.5pc points to 20.4pc in 2018; whereas, T&D losses for Hesco and Sepco by the end of 2018 continues to loom over the same range of 29.8pc and 36.7pc, respectively.
Overall, Discos have experienced an increase of 1.62 percentage points in their T&D losses, from 16.7pc in 2009 to 18.32pc in 2018. In terms of AT&C losses, KE’s AT&C losses have reduced from 43.2pc in 2009 to 27.5pc in 2018 showing a decrease of 15.7pc percentage points; while Discos’ AT&C losses have increased by 0.46pc percentage points between 2009 and 2018.
The report acknowledges marked improvement in overcoming the problem of overloaded feeders and transformers in Karachi whereas the private power utility also achieved 9pc growth in its consumer base from 2016 to 2017, while from 2017 to 2018, it achieved a 6.5pc increase in its consumers. On the other hand, XW-Discos added 4.3pc consumers from 2016 to 2017 while such increase was 5.6pc from 2017 to 2018. These figures reflect that since Discos are not able to increase their consumers; their energy base is not adequate to absorb incremental capacity costs due to addition of generation power plants in the system.
The report also states that on an overall basis, XW-Discos have failed to reduce their T&D losses. The Discps reported actual losses of 18.6pc in the FY 2013-14, showed a slight dip to 17.95pc in FY 2016-17, whereas in FY 2017-18 reported losses of 18.32pc. The recovery of billed amount also shows similar trends. The actual recovery ratio was at 89.11pc in FY 2013-14, which improved to 94.45pc in FY 2015-16; however, the position again deteriorated to 87.71pc in FY 2017-18. As a result, the power sector circular debt is touching Rs1,200 billion mark, with continued addition of approximately Rs 200-250 billion annually.
The federal government has contemplated to stop incremental additions to circular debt through certain measures like budgeting subsidy amounts; notification of Nepra determined tariffs and other measures to control losses. However, it is to be noted that efforts to improve through such accounting measures so that balance sheets of Discos show a healthy position, would not suffice. Fundamental issues of governance, capacity and induction of technological improvements in operations are to be addressed forthwith. Performance of XW-Discos and Gencos, throughout this period of more than two decades, calls for their due independence as continued centralised control has defeated the main object.