Power sector faces Rs654 billion defaulters’ bill, AGP says

LAHORE: The power sector is struggling to collect Rs653.95 billion from consumers who have defaulted on their bills, by Auditor-General of Pakistan's (AGP) latest report showed.

The AGP said in a report for the year ended June 30 that the amount was owed by both government and private consumers, some of whom had been cut off permanently.

The report said the power distribution companies, or DISCOs, had failed to follow the commercial policy and the billing and collection procedure set by the state-owned Water and Power Development Authority.

"In this respect, no efforts were made by the management to accelerate the recovery from defaulters."

According to Para-1.3 of WAPDA Commercial Procedure, “the Revenue Officer and Assistant Manager are responsible for: i) implementing in conjunction with the Executive Engineer, the commercial policy laid down from time to time by the Authority through the Company ii) efficient application of billing and collection procedure”.

The DISCO-wise detail of receivable includes, Faisalabad Electric Supply Company (FESCO) Rs2.03 billion, Gujrawnwala Electric Power Company (GEPCO) Rs11.68 billion, Hyderabad Electric Supply Company (HESCO) Rs139.80 billion, Islamabad Electric Supply Company (IESCO), Rs0.325 billion, Lahore Electric Supply Company (LESCO) Rs31.47, Multan Electric Power Company (MEPCO) Rs1.32 billion, Peshawar Electric Supply Company (PESCO) Rs2.27, Quetta Electric Supply Company (QESCO) Rs460.95 billion, and Tribal Electric Supply Company (TESCO) Rs4.07 billion. Most of the dues of QESCO has been due to non-submission of subsidy amount.

As per report, non-adherence to WAPDA commercial procedure resulted into non-recovery of Rs653.957 billion from energy defaulters up to the financial year 2021-22.

The matter was taken up with the management during April to November, 2022 and reported to the Ministry during June to December, 2022. The management replied that in some cases amount had been recovered and efforts were being made to recover the remaining amount.

The Department Account Committee (DAC) in its meetings held on December 30, 2022 to January 4, 2023 directed the management to produce the record of completed actions within three days and effect pending recoveries. Further progress was not reported till finalization of the report. Audit recommends implementation of DAC’s decision.

Regarding piling up of energy receivables, it is observed that Central Power Purchasing Agency Guaranteed (CPPA-G) purchases energy from power producers on behalf of the DISCOs using the energy transmission network maintained by NTDC. The energy is then sold to the consumers by the DISCOs. Revenue earned from sale of energy is paid by the DISCOs to the power producers through CPPA-G to clear the energy payment invoices. Thus, recovery of energy charges delivered to the consumers is the central link in the power sector supply chain. Piling up of energy receivables implies that cash-shortfall is faced not only in the DISCOs but also in linked entities including CPPA-G and power generation companies. CPPA-G’s receivables from DISCOs caused the circular debt burden on the power sector. The accumulation of liability of CPPA-G comprises of different attributes.

Receivables from DISCOs are one part. Other factors include receivables from the government in lieu of energy subsidy, pending receivables from K-electric and outstanding Late Payment Surcharges levied by the power generation companies on CPPA-G on account of delayed payments.

The piling of energy receivables at the end of DISCOs can be categorized into different classifications and allied causes. The DISCOs were not successful to recover 100% of the amount billed to the consumers during financial year causing increase in the receivables to the stated extent. Moreover, the DISCOs were maintaining a list of running and dead defaulters (consumers). These consumers of different categories (i.e. industrial, commercial and agriculture etc.) had failed to pay their energy dues over an extended period of time causing cash-shortfall as well as financial loss to the company.

Additionally, theft of energy through kunda connection, meter tempering and wrong reading etc.is also prevalent in the DISCOs. There are other systemic issues such as low recovery of dues from tube-well connections and delays in settlement of subsidy pertaining to AJK resulting in to pilling up of overall receivable.

On the above lines, audit has analyzed the issue of pilling up of energy receivables in the DISCOs from different aspects: broadly at a company level as well as at operation circle & consumer level, on a sample analysis basis to highlight the piling up of receivables and illustrated findings in the following paras.