Electricity underutilisation, circular debt demand urgent sectoral reforms

Islamabad:Privatisation can be a viable solution to the problem of electricity underutilisation as long as specific conditions are fulfilled, said experts during a discussion on Tuesday.

According to them, the process should follow a phased, step-by-step approach. For other issues in the power sector, such as uneven cost recovery and rising circular debt, urgent reforms are needed in governance, service quality, and demand-side management to restore consumer trust and enhance grid efficiency.

The event, titled “Addressing Electricity Underutilisation and Affordability: A Demand Side Approach to DISCOs Reforms,” was held at the Institute of Policy Studies (IPS) here, with former water and power secretary Mirza Hamid Hassan in the chair.

IPS chairman Khalid Rahman pointed to the extra generation planned for Special Economic Zones under CPEC, which, he said, largely failed to materialise, contributing to the current crisis in the power sector, particularly in the form of capacity payments to IPPs and the rising circular debt.

He emphasised the importance of learning from global experiences while formulating long-term, locally grounded strategies. Hamid Hassan aid DISCOs were not solely to blame for the rising circular debt in the power sector.

He said inefficiencies across the generation and transmission stages were ultimately passed on to the DISCOs, which were then tasked with recovering costs across the entire value chain. "When they fail to do so, electricity prices rise, making power more expensive and further contributing to underutilisation," he noted.

Chairman of the board of directors at LESCO and MEPCO Amer Zia noted that electricity underutilisation could be mitigated by ensuring a reliable power supply and improving both the quality and availability of service.

He identified poor service quality as a key factor behind underutilisation, driving consumers to alternative sources such as captive power and solar energy "Three distribution companies, including IESCO, FESCO and GEPCO, are currently undergoing privatisation. The process is well-planned, well-managed, on track and free from bureaucratic or political influence," he said. Zia added that the boards were independent in their decision-making and were working efficiently to deliver results and address operational challenges.

General manager (finance) at CPPA-G Zubair Chaudhary argued that performance depended more on the operating environment than on ownership status. He, however, acknowledged that privatisation could help improve management and operational control. Chaudhry said cost recovery was concentrated on a small segment of consumers despite the system being fully utilised. He noted that the rise in solar adoption had complicated the issue of underutilisation.

IESCO chief engineer Asim Ejaz argued that privatisation often prioritised profit generation over service quality, which could be counterproductive in the case of his power utility. "Despite limited resources, IESCO is actively working to improve service quality."

Senior energy economist at the Pakistan Institute of Development Economics Afia Malik said the power sector policies were often conflicting and undermined the intended spirit of DISCO privatisation.

"While privatisation can be beneficial, it must be pursued in its true form, which is lacking in the current context. Instead of full-scale privatisation, selectively privatising certain assets may yield better outcomes," she noted.