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October 21, 2020

NEPRA’s charge sheet against DISCOs on low recovery and high losses

National

October 21, 2020

ISLAMABAD: NEPRA in its State of Industry Report 2020 presented a charge sheet against electricity power distribution companies (DISCOs) mentioning that the recovery of electricity bills has reduced by 1.48 percent to 88.77 per cent in 2019-20 from 90.25 percent whereas the line losses of DISCOs have swelled to 26.68 percent.

The report also directly held the federal government responsible for not paying subsidies to the power sector owing to which it could not pay to IPPs on time because of which the circular debt has increased to Rs2.1 trillion as on June 30, 2020.

However, K Electric performed well as it recoveries remained at 92.14 percent. And the K Electric braved the transmission and distribution losses of 19.73 percent. The report also mentioned that KE has developed, managed, maintained and operated distribution network within its service area.

Pinpointing the reasons for higher cost of electricity, the NEPRA report says that over a period of time, electricity prices have been increasing for end consumers, which is a growing concern for the regulator. Besides the higher Transmission & Distribution losses, the low recoveries and under-utilization of ‘Take or Pay’ power plants, various other elements like currency devaluation, low sales growth rate, front-loaded tariff, operation of costlier power plants due to transmission constraints have added to the increased cost.

The report also highlighted the bitter facts saying that the high cost of electricity, inefficient distribution services and loadshedding policy on high loss feeders is pushing consumers away from the DISCOs. The loadshedding policy is compelling the consumers for use of smaller inefficient gas or diesel generators as well as Uninterrupted Power Supply (UPS), which has disrupted the efficient allocation of valuable resources in the economy. The distributed generation through solar power solutions has made a significant ingress

in the domestic consumer base of DISCOs, which are losing consumers with high consumption and paying capacity.

Similarly, the commercial, educational and industrial outfits are also inclined to drift away from DISCOs and opt for self-generation through solar power. So far, nearly 5,000 Net-Metering Licences with around 86MW electric power generation capacity have been issued by NEPRA. Apart from the distributed generation, various industrial and commercial consumers of DISCOs, dissatisfied with the higher cost and poor quality of services, tend to directly purchase electricity from generation companies for reliable and cheaper electricity supply through wheeling arrangements. Although, DISCOs are resisting the wheeling regime, the regulator cannot deprive consumers to buy cheaper electricity from the sources of their choice.

The regulator also directly held the federal government responsible for increasing the circular debt as it delayed the payments of subsidies to the power sector. DISCOs are required not only to improve recovery from public and private consumers but also to actively follow-up with the relevant governments for timely recovery of subsidy amounts.

According to the NEPRA’s State of Industry report, there is a potential to decrease the electricity cost by making efficient decisions and maintaining good governance in the power sector. It says that if the government goes for operating the most efficient plants at optimal load, retiring the inefficient power plants specifically the ones operating in public sector GENCOs, improving the supply chain for RLNG, displacing expensive electricity with cheap electricity generation options, allocating of cheapest gas (pipeline quality) to the most efficient power plants, ensuring minimum operation of combined cycle power plants in open cycle mode, discouraging use of pipeline quality gas in open cycle steam turbine thermal power plants, inducting small and medium size solar power plants near existing grid stations, avoiding operation of most efficient power plants on part load, ensuring the availability of transmission line to evacuate electricity from most efficient power plants, executing Transmission Service Agreement, decreasing the transmission and distribution losses, retiring the circular debt, ensuring the timely payments of subsidy amounts, avoiding loadshedding on feeders on the basis of Aggregate Technical & Commercial losses, improving the billing collection ratio, revisiting the use of two basket system in the country, decreasing the levies on primary energy being used for power generation, avoiding recoveries of various taxes/fees/levies through electricity bills, adopting effective demand side management, introducing Time-of-Use (TOU) tariff in off-peak hours for optimum utilization of ‘Take or Pay’ electric power generation capacity, inducting peak load power plants in the system, and encouraging merchant plants to supply electricity in the country.