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September 21, 2019

Nepra not to renew licences of inefficient power plants

Business

September 21, 2019

KARACHI: The National Electric Power Regulatory Authority (Nepra) has decided not to renew licences of the power plants that have lowest efficiency levels. Nepra, in its report on Friday, said urgent measures are needed for the revival of the collapsed sector.

“The power sector with a circular debt of around Rs1 trillion by the end of December 2018 presents a major challenge for the government,” Nepra said. Nepra said public sector generation companies (Gencos) are contributing to expensive energy production due to their inferior efficiencies. “Nepra has decided to not renew the licences of those power plants having worst performance levels,” it added. “The regulator considers that inefficient power plants are needed to be retired on priority.”

The federal government is expected to take early decision on the fate of inefficient Gencos to lower the costs of expensive energy mix. Nepra, its state of industry report, said transmission sector has shown improvement to some extent after the addition of more than 10,000 megawatts of new generation capacity over the last five years, whereas the distribution sector has totally gone into failure.

Nepra, referring to K-electric Limited (KEL), said KEL could barely meet the expected demand at peak times till 2020. Outage of a power plant or even outage of a single unit of around 200MW may result in breakdown of the system. “Even the surplus expected in 2021 would not be enough to operate KEL system with technically prudent margins.”

Nepra said KEL has significantly reduced its transmission and distribution losses as compared to distribution companies. Prior to 2009, KEL’s transmission and distribution (T&D) losses of 35.9 percent were at par with T&D losses of Hyderabad and Sukkur electric supply companies (Hesco, Sepco). “Through a combination of loss reduction projects and initiatives such as use of aerial bundled cable, the company has mitigated the losses by 15.5 percentage points to 20.4 percent in 2018, whereas, T&D losses for Hesco and Sepco by the end of 2018 continue to loom over the same range of 29.8 percent and 36.7 percent, respectively.”

Overall, discos have experienced an increase of 1.62 percentage points in their T&D losses from 16.7 percent in 2009 to 18.32 percent in 2018. In terms of aggregate technical and commercial (AT&C) losses, KEL’s AT&C losses have declined from 43.2 percent in 2009 to 27.5 percent in 2018, showing a decrease of 15.7 percent percentage points, while discos’ AT&C losses have increased 0.46 percent percentage points between 2009 and 2018. KEL has been able to achieve nine percent growth in its consumer base from 2016 to 2017, while from 2017 to 2018 it achieved a 6.5 percent increase in its consumers.

The discos added 4.3 percent consumers from 2016 to 2017, while such increase was 5.6 percent from 2017 to 2018. It also reflected 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.

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