Discos unlikely to yield desired results: Nepra

ISLAMABAD: Despite promises of reform, Pakistan’s power sector continues to struggle with distribution companies (Discos), including K-Electric, failing to meet expectations and deliver reliable electricity to consumers, National Electric Power Regulatory Authority (Nepra) said in its latest report.

Throughout 2022-23, the performance of Discos remained below quality level highlighting the failure to achieve anticipated power sector reforms. This revelation comes as a blow to citizens who have long suffered from inconsistent power supply, Nepra’s latest performance evaluation report of Discos said.

The report says that that under the current circumstances, the existing Disco setup is unlikely to yield the desired results. The ongoing poor performance underscores the urgent need for significant structural changes on a large scale.

The authority’s proposed reforms include the division of large Discos into smaller units, provincialisation, privatisation, or corporatisation on a public-private partnership basis.

Additionally, reducing the influence of unions within the power sector, discontinuing policies leading to Aggregate Technical & Commercial (AT&C) losses through modern technology, outsourcing of high-loss feeders, implementing demand-side management, and adopting a customer-oriented business approach are recommended. Such sweeping changes are deemed necessary to address systemic issues and enhance the overall performance and efficiency of Pakistan’s power distribution system, it said.

The failure to enact these reforms not only perpetuates the suffering of consumers but also undermines economic growth and development initiatives in the country.

The report evaluates compliance with standards, highlighting improvements in some areas but stagnation in others. Challenges like data authenticity contribute to circular debt, impacting reliability and affordability. Nepra emphasises addressing sector-wide issues for sustainable electric power services crucial to Pakistan’s economic growth.

In the report Nepra urges Discos to cut transmission and distribution (T&D) losses, emphasising financial implications.

In fiscal year 2022-23, Discos experienced an overall actual loss of 16.38 percent, slightly down from the 16.69 percent loss in FY 2021-22. Despite Nepra allowed T&D losses of 12.21 percent for FY 2022-23, most Discos failed to meet this target, with exceptions of Fesco, Gepco, and K-Electric. The failure of other Discos to adhere to Nepra’s targets contributed to more than Rs166 billion loss to the national exchequer.

T&D losses in Pesco were the highest at 37.13 trailed by Sepco at 34.37 percent, Hesco at 27 percent, Qesco 26.7 percent and Mepco at 14 percent.

DISCOS are deliberately drawing less power than demanded, despite being allocated an adequate quota for load shedding based on AT&C losses policy. The reliance on AT&C-based load-shedding, especially by Pesco, Qesco, Sepco, and Hesco, reflects a preference for managing recovery rather than maximising collection efforts.

In terms of recovery, only Iesco achieved the target of 100 percent recovery in FY 2022-23. Gepco, Fesco, and Mepco closely followed with recoveries ranging from 98 to 99 percent. Others such as Pesco, Lesco, and K-Electric exceeded 90 percent, while Hesco and Sepco remained in the middle, reporting values of 75.9 percent and 68.2 percent respectively. Notably, Qesco performed the worst with a reported recovery position of 36.9 percent.

Despite Nepra’s requirement for Discos to achieve a 100 percent collection basis for consumer end tariff determination, the overall recovery for FY 2022-23 was 86.26 percent, down from 90.51 percent in the previous year. This decline has significantly impacted revenues, resulting in a loss to the national exchequer exceeding Rs263 billion.

None of the distribution companies met the System Average Interruption Frequency Index (SAIFI) standard of 13, and almost all fell short of the System Average Interruption Duration Index (SAIDI) standard of 14 minutes.

The issue of pending connections remains a concern, with 278,815 connections withheld from eligible consumers despite timely payments, leading to an unmet demand of over 1,100 MW. While some Discos have claimed to meet the requirement by providing new connections to over 95 percent of eligible consumers, others such as Sepco and K-Electric fell short, the report says.

Load shedding durations varied, with Iesco, Fesco, Gepco, Lesco, Mepco, and Sepco averaging 2 to 3 hours daily, while Pesco, Qesco, Hesco, and K-Electric reported longer durations, ranging from 4.5 to 10.25 hours. Notably, the distribution companies carrying out load-shedding based on AT&C losses criteria, including Pesco, Qesco, Sepco, Hesco and K-Electric, are not aligned with the Performance Standards (Distribution) Rules 2005.

Complaint data provided by Discos for FY 2022-23 totaled 3,694,861, indicating potential deficiencies in complaint handling mechanisms and reporting systems. Concerns were raised regarding Sepco’s lack of complaints reported, prompting Nepra to express reservations about the data reported by Discos.