Friday August 12, 2022

Power theft incurs loss of $58.7 billion in top 50 emerging economies

September 13, 2016

LAHORE: Power theft is an issue in most of the developing economies as per the Washington-based Northeast Group LLC accounts, which incurs an annual loss of $58.7 billion in the top 50 emerging countries, including Pakistan.

Electricity theft takes place through meter tampering, illegal connections, physical destruction of meter, and stopping the rotating disc of the energy meter. Some of this theft is covered through fake billing, where the thief gets a lower bill compared to an honest consumer.

The theft occurs mainly due to poor infrastructure, corruption, political uncertainty, inefficient government, incompetent power sector staff, poor law and order, and most of all due to unaccountability of staff.

These deficiencies also give rise to other practices, which cannot be classified as theft, but do result in lower production from state controlled plants, with the inefficiencies increasing over time. This includes mixing water in the fuel of the plants, something which was reported about five years ago by US auditors appointed by the USAID.

These losses are much higher than the losses due to power theft. The system is unable to upgrade or even maintain its transmission and distribution systems because of these factors. All of this is despite that the National Electric Power Regulatory Authority (Nepra) has allowed power companies line and transmission losses of up to 13.5 percent –much above the average line and transmission losses of 5-7 percent in developed economies. On top of this, the power charges are much higher than the cost of energy production.

Bifurcation of around Rs500 million annual losses of the power sector are not easy, but global studies, those quoted in the northeast reveal that the energy theft accounts for Rs90 billion losses. This loss is mainly distributed at the lower level, starting from meter reader to the SDO of each region.

Still, the distribution is enough that even the meter reader with a paltry salary can afford to drive a good condition car (most of them do) and get their children educated in quality schools. For higher ranks the booty is higher and visible in their life style.

The losses during transmission are technical losses that occur in almost all the countries and are minimal in Pakistan as well. Then there are non-technical losses that are due to corruption, incompetence and absence of political will of the governments. It is difficult to measure, as these usually occur due to the connivance at the distribution level.

The persons responsible for these losses are unaccountable in the current management system in Pakistan. Transmission losses occur due to lengthy single phase lines, improper cable earthling at remote sides, poor quality cable and equipment, and power over loading on transmission lines. It is worth noting that the TL and NTL power losses in seven out of nine power distribution companies are higher than the limit determined by Nepra. The two companies FESCO and IESCO have lower losses.

The emphasis is mostly given to power theft. Power thefts through direct connections (kunda) are visible to everyone. The consumer of electricity dares the authorities to apprehend them if they have the courage. Those consuming power directly have no need for conservation.

The government should first muster the courage to nab these users that are either highly influential or well organised. Other thefts could then be controlled through technology. Controlling power theft would not resolve the issue of resource shortages in the power sector. Rest of the Rs400 billion leakages occur elsewhere.

Nepra determines the power rate on the basis of the average efficiency of power producing generators. It is true that the regulator has made it mandatory for the National Transmission and Distribution Company order power supply from companies that have produced energy at the lowest rate. But this may work during brief periods when power needs are lower than the generating capacity.

There is an average shortage of 5,000-7,000MW in power production.

This means that the inefficient and efficient plants have to operate all the time. The efficiencies are such that the production costs of even gas run generators differ by Rs3-4 per unit.

The furnace oil generators produce power at Rs8 per unit as well as Rs20 per unit. Why there is no emphasis on improving the efficiencies. The private sector generators are relatively more efficient, it is the public sector that needs revamping.

The problem with private sector generators is that the government, under its sovereign guarantee, has to pay the capacity charges when public sector water and gas-based generators are preferred over furnace oil.  The capacity charges increase the price of power.